A monopolist has a constant marginal cost of production of $5 per unit. It also faces two different markets that cannot communicate with each other, Qa=55 - P1 and Q2=70 - 2P2
(a) If the monopolist can maintain the two markets’ total separation, how much would it charge and supply in each market? How much would be total profits?
(b) Suppose goods could be transported between the two markets, but at a cost of $5 per unit. How much would the monopolist charge and supply in each market? How much would be total profits?
(c)Suppose transportation costs fall to zero and the could now be freely transported between the two markets. How much would the monopolist charge and supply in each market? How much would be total profits?
(d)Suppose the monopolist adopts a linear two-part tariff as described in the textbook. What pricing policy should it follow?