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:

Extinction

In behavioral psychology, it refers to the process where a conditioned response decreases in frequency and eventually disappears when the reinforcement is no longer presented.

Conditioned Stimulus

An initially unimportant stimulus that, following its association with an unconditioned stimulus, comes to evoke a conditioned response.

Unconditioned Stimulus

A stimulus that naturally triggers a response without any prior learning.

Generalization

In psychology, the tendency to respond in the same way to different but similar stimuli; in learning, it's the application of past learning to new situations.