Suppose that a monopolist faces two markets with demand curve given and
Assume that the monopolist’s marginal cost is constant at $20 a unit. If the monopolist can price discriminate,
what price should it charge in each market in order to maximize profits?
What if it can’t price discriminate?
Then what price should it charge?
If the monopolist can price discriminate, it should charge a price in each market that is equal to the marginal revenue in that market. The marginal revenue in each market can be calculated by taking the derivative of the demand curve in each market.
If the monopolist cannot price discriminate, it should charge a price that is equal to the average revenue in each market. The average revenue in each market can be calculated by taking the integral of the demand curve in each market.