A Monopolist Sells in Two Markets

question 21

Multiple Choice

A monopolist sells in two markets. The demand curve for her product is given by p₁ = 165 - 3x₁ in the first market and p₂ = 233 - 4x₂ 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 = 9, 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 = 26 and x₂ = 28.
• B) x₁ = 54 and x₂ = 26.
• C) x₁ = 36 and x₂ = 26.
• D) x₁ = 52 and x₂ = 30.
• E) x₁ = 46 and x₂ = 38.

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Definitions:

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain from business activities.

Authors' Royalties

Authors' royalties are payments made to authors from publishers or producers, based on a percentage of sales of their work.

Fixed Cost

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.

Debt-to-Total-Assets Ratios

A measure that indicates what proportion of a company's assets is financed through debt.