A weapons producer sells guns to two countries that are at war with each other

QUESTION

1. (25 points) A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $5. The demand for guns from the two countries can be represented as:QA =100-2p QB =80-4p(a) (6 points) Why is the weapons producer able to price discriminate in this context?(b) (10 points) What price will it charge to each country? What will the monopolist’s profit be in total and in each country?(c) (4 points) If the weapons producer were not able to price discriminate and wants to sell in both countries, what price would it charge? What would be its profit? (Hint: draw the demand curves for each country and the total demand curve. Is the total demand curve a straight line?)(d) (3 points) Compare your answers in the two questions above. Will the producer sell in both countries?(e) (2 points) Which country will benefit from price discrimination? Which country will be worse off from price discrimination? Explain briefly

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