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

Market A:
`P_(A) = 20.00`

Market B:
`P_(B) = 20.00`

Step-by-step 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) = (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`