A Monopolist Sells in Two Markets

question 27

Multiple Choice

A monopolist sells in two markets. The demand curve for her product is given by p₁ = 122 - 2x₁ in the first market and p₂ = 306 - 5x₂ in the second market, where x_i is the quantity sold in market i and p_i is the price charged in market i. She has a constant marginal cost of production, c = 6, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

• A) x₁ = 58 and x₂ = 32.
• B) x₁ = 29 and x₂ = 30.
• C) x₁ = 59 and x₂ = 29.
• D) x₁ = 39 and x₂ = 28.
• E) x₁ = 49 and x₂ = 40.

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Definitions:

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating the profitability on a per-share basis.

Par

This refers to the face value of a bond or stock as stated by the issuing company.

Net Income

After all costs and taxes are removed from revenues, the company's residual profit.

Treasury Stock

This refers to shares of stock that were issued and later reacquired by the issuing corporation. It is often held to utilize in future acquisitions or to reissue to employees as part of compensation packages.