Question

A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is p Subscript a Baseline equals 110 minus Upper Q Subscript a​, and the Japanese inverse demand function is p Subscript j Baseline equals 100 minus 2 Upper Q Subscript j​, where both​ prices, pa and pj​, are measured in dollars. The​ firm's marginal cost of production is m​ = ​$25 in both countries. If the firm can prevent​ resales, what price will it charge in both​ markets? ​(Hint​: The monopoly determines its optimal​ (monopoly) price in each country separately because customers cannot resell the​ good.) The equilibrium price in Japan is ​$ nothing. ​ (round your answer to the nearest​ penny)

Answer 1

The equilibrium price in America is 67.5 while for Japan is 52.5

Step-by-step explanation:

Solution

Given that:

The American Market

Pa = 110- Qa

TRa = PaQa = 110Qa - Qa²

MRa = d (TRa)/dQa =110 - 2Qa

Thus,

MC =m = 25

Now,

At profit Maximization, MRa = MC

110 - 2Qa = 25

Qa = 42.5

Pa =110 -42.5 = 67.5

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