Consider an economy in which a monopolistic firm serves two identical, but separate markets, called A and B.
The aggregate inverse demand in each market is given by 1000−q.
The cost function for the monopolist is given by (qA+qB)^2, where qA andqB denotes the amount sold in each market.
Suppose that each market is regulated by a separate government, and that the government of market A requires the monopolist to sell exactly 250 units on its market.
Suppose also that the monopolist is allowed to charge different prices on each market, but is not allowed to engage in more sophisticated forms of price discrimination.
Given these policies, what is the total amount produced by the monopolist in equilibrium?