A monopolist operates in two cities, A and B, and may choose different quantities and prices in each city. The cost function based on total production q = q₁+qB is C(q) = q+0.5q²+q³. There are no shipping costs. Demand in each city is QA (PA) = 2p₁₁ and QB(PB) = PB². If the monopolist maximizes profits, what is the ratio of prices PA/PB? (a) PA/PB = 3/6 (b) PA/PB = 5/6 (c) PA/PB = 8/5 (d) PA/PB = 4/7 (e) None of the options above.
A monopolist operates in two cities, A and B, and may choose different quantities and prices in each city. The cost function based on total production q = q₁+qB is C(q) = q+0.5q²+q³. There are no shipping costs. Demand in each city is QA (PA) = 2p₁₁ and QB(PB) = PB². If the monopolist maximizes profits, what is the ratio of prices PA/PB? (a) PA/PB = 3/6 (b) PA/PB = 5/6 (c) PA/PB = 8/5 (d) PA/PB = 4/7 (e) None of the options above.
Chapter25: Monopoly
Section: Chapter Questions
Problem 14E
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Transcribed Image Text:A monopolist operates in two cities, A and B, and may choose different quantities and prices
in each city. The cost function based on total production q = q₁+qB is C(q) = q+0.5q²+q³.
There are no shipping costs. Demand in each city is QA (PA) = 2p₁₁ and QB(PB) = PB². If
the monopolist maximizes profits, what is the ratio of prices PA/PB?
(a) PA/PB = 3/6
(b) PA/PB = 5/6
(c) PA/PB = 8/5
(d) PA/PB = 4/7
(e) None of the options above.
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