Problem
Apple sells the same iphones in canada and in the U.S at a constant marginal ( and average variable) cost of 500. (Assume that a U.S dollar is the same as a Canadian Loonoie) The demand is Qc=2,000-1,000Pc in Cana and Qu=6,000,000 - 2,000 Pu in the U.S.
For your information, when a monopolist faces a linear demand of the form Q=a-bP and the produces at a cost a constant marginal cost c, it will maximize profit by changing a price Pm=a+bc/2b
At the price, it will sell a quantity Qm = a-bc/2
a) If apple can maintain separation between the two markets, what price will it charge in canada?
b) If apple can maintain the separation between the two markets, what price will it charge in the U.S?