Doubt on monopoly

[The Villain]

CONTENTS DELETED

The author has deleted this message.

[Ashima]

Whats the answer of part 1?

[The Villain]

The ans is 7.5 an 10.
Among the options b is the best choice.
Tell me about part 2...someone pls help

[Ashima]

I am getting, 7.5 and 7.33, best option is 7,7.
How'd you do it?
Since its perfect price discrimination, we will do P= mc? Isn't it?

Please help.

[The Villain]

At first even i thought so.
Bt the answer is b....Moreover whenever there are two different markets it is 3rd degree price discrimination..

[Ashima]

Because its prefect price discrimination, the MR curve will be the demand curve itself, so I guess we will do P= MC?

pLEASE HELP ME, i AM GETTING CONFUSED.

[L14]

Hi Ron/Ashima I'm not sure how u r getting 7.5 or 7.33. Pls correct me if I'm wrong
The monopolist will try to maximize in both the markets.
In market 1 his MR=15-2q1 MC=1
15-2q1=1
=>q1=7

In market 2 his MR=11-q2 MC=1
11-q2-1
=>q2=10
so the bundle=(7,10)


And for qn 2, the monopolist should choose the market with higher slope to tax. As lower the slope more it falls on the supplier. So he will choose to tax market 1.
But the new profit I'm getting is not matching with the problem.
At new prices p1=17-q1
MR=17-2q1 MC=1
q1=8 => p1=9
profit=rev-cost = 9*8-8=64
Where did I go wrong
Ans should be either a or c

[RajEco]

I am getting confused with the options you have written in que 2. Option b is same as option d.

Anyways my calculations are-
Before tax profits- Profit(1)= 49  Profit(2) = 50
After tax profits  - Profit'(1)= 36  Profit'(2) =32

So tax should be imposed on market 1 because after tax loses are less when compared to Market 2.

[RajEco]

@ben10

I think you made a mistake by taking the after tax inverse demand function wrong.
I took it as-
p+2 = 15-q
=> p=13-q

[Ashima]

Why has the question been deleted? :/

[The Villain]

By mistake....here


q1 a) Consider a monopolist. Two markets 1,2 . p1=15-q1 and p2=11-q2/2 and c(q)=q. Assume that firm can perfectly price discriminate. Then the quantity sold in each market is
a) {q1,q2} = {10,7}
b) {q1,q2} = {7,10}
c) {q1,q2} = {7,7}
d) {q1,q2} = {10,10}

  b) Suppose government wants to tax one of the market , which takes consumer’s price in relation to producer’s , pc=ps + t, with t=2. Monopolist would readjust its output according to this new price, which market would monopolist prefer to have a tax on?
a) At new prices, profit of  1 = 32 and hence higher than new profit of 2, so losses will be smaller if tax is placed on market 1
b) At new prices, profit of 2 = 32 and hence higher than new profit of 1, so losses will be smaller if tax is placed on market 2
c) At new prices, profit of 1 = 36 and hence higher than new profit of 2, so losses will be smaller if tax is placed on market 1
d) At new prices, profit of 2 = 32 and hence higher than new profit of 1, so losses will be smaller if tax is placed on market 2