9. The Errata Book Company is a monopolist that sells in two markets. The margin
ID: 1105978 • Letter: 9
Question
9. The Errata Book Company is a monopolist that sells in two markets. The marginal-revenue curve in the first market is MR20 -2Q,, where MR is the marginal-revenue in the first marker and is the number of books sold per day in the first market. The marginal-revenue curve in the second market is MR215-322, where MR2 is the marginal revenuc in the sccond market and Q is the number of books sold per day in the second market. If the marginal cost of a book is $6, how many books should the Errata on na market? (Hint: Work backward from the marginal-revenue curves to solve for market demand curves.)Explanation / Answer
Market 1
We equate MR1 and MC to determine the quantity and price in this market
20 - 2Q1 = 6
14 = 2Q1
Q1* = 7 books
Now if MR = 20 -2Q1, TR = 20Q - Q1^2 and so demand is P = 20 - Q1
Price will be 20 - 7 = $13 per book
Market 2
We equate MR2 and MC to determine the quantity and price in this market
15 - 3Q2 = 6
9 = 3Q1
Q1* = 3 books
Now if MR = 15 -3Q1, TR = 15Q - 1.5Q1^2 and so demand is P = 15 - 1.5Q1
Price will be 15 - 1.5*3 = $10.5 per book
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