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:

Economic Profit

The total revenue from operations minus both the explicit and implicit costs; it's a measure of profitability factoring opportunity costs.

Accounting Profit

The net income a company reports on its financial statements, calculated as total revenues minus explicit costs of doing business.

Marginal Cost

The additional cost incurred by producing one more unit of a good or service.

Marginal Benefit

The additional benefit derived from producing one more unit of a good or service.