Question

Determine the profit-maximizingLOADING... prices when a firm faces two markets where the inverse demand curves are Market​ A: p Subscript Upper Aequals80minus2Upper Q Subscript Upper A​, where demand is less​ elastic, and Market​ B: p Subscript Upper Bequals60minus1Upper Q Subscript Upper B​, where demand is more​ elastic, and Marginal Costequalsmequals20 for both markets.

Answer 1

Answer:

Market A: $P_{A} = 20.00$

Market B: $P_{B} = 20.00$

Explanation:

Market A: $P_{A} = 80 - 2Q_{A}$ ........................ (1)

Market B: $P_{B} = 60 - 1Q_{B}$ ........................ (2)

MC = m = 20 ............................................... (3) for both markets

For Market A:

Profit maximizing price can be obtained when  $P_{A} = m$

Therefore, we have:

$80 - 2Q_{A} = 20$

$80 - 20 = 2Q_{A}$

$60 = 2Q_{A}$

$Q_{A} = \frac{60}{2}$

$Q_{A} = 30$

Substituting 50 for $Q_{A}$ in equation (1), we have:

$P_{A} = 80 - 2(30)$

$P_{A} = 80 - 60$

$P_{A} = 20.00$

For Market B:

Profit maximizing price can be obtained when  $P_{B} = m$

Therefore, we have:

$60 - 1Q_{B} = 20$

$60 - 20 = 1Q_{B}$

$40 = 1Q_{B}$

$Q_{B} = 40$

Substituting 80 for $Q_{B}$ in equation (2), we have:

$P_{B} = 60 - 1(40)$

$P_{B} = 20.00$