Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both East Legon and Nima markets to be: Q1 = 24-0.2P₁ East Legon Market Q2 = 10-0.05P2 Nima Market Where Q1 and Q₂ are the respective quantities of African Solar demanded in the East Legon and Nima markets and P₁ and P₂ are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 400, where Q = Q1 + Q₂. i. What profit will Majjus Enterprise make with and without price discrimination? 11. What business advice will you give in respect of practicing price discrimination or selling a uniform price? iii. If price discrimination is the option to implement within the context of elasticity of domond what pr ou should be implemented in gach m co total fottono?
Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both East Legon and Nima markets to be: Q1 = 24-0.2P₁ East Legon Market Q2 = 10-0.05P2 Nima Market Where Q1 and Q₂ are the respective quantities of African Solar demanded in the East Legon and Nima markets and P₁ and P₂ are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 400, where Q = Q1 + Q₂. i. What profit will Majjus Enterprise make with and without price discrimination? 11. What business advice will you give in respect of practicing price discrimination or selling a uniform price? iii. If price discrimination is the option to implement within the context of elasticity of domond what pr ou should be implemented in gach m co total fottono?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product
called African Solar. Your company sells to two distinct geographical markets-East Legon and
Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating
between its East Legon and Nima Markets. In order to derive the maximum profit from the
production process, you engaged the services of an Econometrician, who estimated the demand
functions for both East Legon and Nima markets to be:
Q1 24-0.2P1
Q2 = 10-0.05P2
East Legon Market
Nima Market
Where Q1 and Q2 are the respective quantities of African Solar demanded in the East Legon and
Nima markets and P₁ and P₂ are their respective prices (in GH¢). If the Total Cost (TC) of Majjus
Enterprise for producing African Solar for these two markets is given as TC = 35 + 400, where Q
= Q1 + Q₂.
i.
What profit will Majjus Enterprise make with and without price discrimination?
ii.
What business advice will you give in respect of practicing price discrimination or selling
a uniform price?
111.
If price discrimination is the option to implement within the context of elasticity of
demand, what pricing policy should be implemented in each market to raise total revenue?
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