Answer:
The difference between the monopolistic price charged in England and the monopolistic price charged in the United States will be = 27
Explanation:
Y1 = 7200 -100p1 = > p1 = 72 – y1/100
Y2 = 3600 – 200p2 = > p2 = 18 – y2/200
The cost of monopolist (since it’s the same firm and uses same technology) shall be same in both countries, hence let us assume marginal cost to be say c
Now the first order condition for Profit Maximisation of a monopolist yields
Marginal Revenue = Marginal cost
= > Marginal Rev US = c = Marginal RevEngland…………………..i
Now, Revenue in US = p1y1 = y1(72 – y1/100)
MR US = dRev/dy1 = 72 – y1/100 -y1/100 = 72 – y1/50
Similarly MREng = 18 – y2/100
Hence putting the above derivations in i:-
72 – y1/50 = 18 – y2/100
Now putting values for y1 and y2 again the above equation becomes:-
72 – (7200 -100p1)/50 = 18 – (3600 – 200p2)/100
= > 54 – 144 + 2p1 = -36 + 2p2
= > 2(p1 – p2) = -36 + 90 = 54
= > p1 – p2 = 27
