American Export-Import Shipping Company operates a general cargo carrier service between New York and several Western European ports. It hauls tow major categories of freight: manufactured items and semi manufactured raw materials. The demand functions for these two classes of goods are:
P1 = 100 - 2Q1
P2 = 80 - q2
Where Q1 = tons of freight moved. The total cost function for American is
TC = 20 + 4(Q1 +Q2)
A. What are the profit-maximizing levels of price and output for the two freight categories?
B. At these levels of output calculate the marginal revenue in each market.
C. What are Americans total profits if it is effectively able to charge different prices in the two markets?