Marryweather Ltd. is a company that sells machines in the US and the EU. The inversedemand functions for the two markets are given as Pus = 10 – Yus and pgu = 6 - Yev.respectively. The machines for both markets are manufactured in Poland with a fixed %marginal cost of $2 and sold to clients only through its online retail stores (assume theonline stores are affiliates of the company and that the profits are directly recorded byMarryweather, Ltd.). Due to its unique patented technology, the company is a monopoly inboth markets.1. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has oneglobal retail agreement with its online vendor that sells to both markets. Drawing adiagram (with the proper labels) show the combined market demand and marginalrevenue. What is the price? What is the total profit? How many machines does thecompany sell in each market?2. If Marryweather, Ltd. could perfectly price discriminate in the combined marketfrom part (b), what would be the price and quantity? What is the total profit?

The demand function in the US,Yus = 10- PusThe demand function in the EU,Yeu = 18 – 3 PeuThe…

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ENGR.ECONOMIC ANALYSIS

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Marryweather Ltd. is a company that sells machines in the US and the EU. The inverse
demand functions for the two markets are given as Pus = 10 – Yus and pgu = 6 - Yev.
respectively. The machines for both markets are manufactured in Poland with a fixed %
marginal cost of $2 and sold to clients only through its online retail stores (assume the
online stores are affiliates of the company and that the profits are directly recorded by
Marryweather, Ltd.). Due to its unique patented technology, the company is a monopoly in
both markets.
1. Assume, instead of the exclusive territorial agreements, Marryweather, Ltd. has one
global retail agreement with its online vendor that sells to both markets. Drawing a
diagram (with the proper labels) show the combined market demand and marginal
revenue. What is the price? What is the total profit? How many machines does the
company sell in each market?
2. If Marryweather, Ltd. could perfectly price discriminate in the combined market
from part (b), what would be the price and quantity? What is the total profit?

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