Consider a monopolist who sells in two different markets. The (inverse) demand curve in Market 1 is given by P₁ = 360 - Q₁. The (inverse) demand curve in Market 2 is given by P₂ = 240 - Q₂. For the sake of convenience, we will assume that the monopolist has zero marginal costs implying that maximizing profit and maximining revenue are synonymous for this monopolist. (i) What is the profit (or revenue)-maximizing quantity and price in Market 1? How much is this profit (revenue)? (1 mark) (ii) What is the profit (or revenue)-maximizing quantity and price in Market 2? How much is this profit (revenue)? (1 mark) (iii) Now suppose the monopolist did not discriminate in prices and charged the same price in both markets. Show that the resulting profit (revenue) is less than what the monopolist makes when she charges two different prices across the two different markets.
