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2 November, 15:26

A monopolist sells in two different markets and charges the same price of $10 in both markets. In Market A, the demand curve is described by Qd = 50 - 2P. In Market B, the demand curve is described by Qd = 60 - P. If the monopolist lowers prices by $1 in the market with the more elastic demand and raises prices by $1 in the market with the more inelastic demand curve, by how much does its total revenue change? A) $27 B) $459 C) $767 D) $308

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  1. 2 November, 16:26
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    TR change = - $27

    Explanation:

    solution

    first we take market A

    Qd = 50 - 2P

    same price P = $10

    and Qd = 30

    So than TR will be

    TR = P * Q

    TR = $10 * 30

    TR = $300

    and

    for Market B are

    Qd = 60 - P

    same price P = $10

    and Qd = 50

    so that TR will be

    TR = P * Q

    TR = $10 * 50

    TR = $500

    so that TR in both market will be

    TR in both market = $300 + $500

    TR in both market = $800

    and monopolist lowers prices by $1

    so that

    so in market A Qd = 50 - 2 (9)

    market A Qd = 32

    and

    TR = $9 * 32 = $288

    and

    so monopolist raises prices by $1

    so that

    market B Qd = 60 - 11

    market B Qd = 49

    TR = $11 * 49 = $539

    so that

    TR in both market will be = $288 + $539

    TR in both market = $827

    and TR change is

    TR change = $800 - $827

    TR change = - $27
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