The demand for detergent in Tanzania is characterized by the following functuon P(Q) = 100 - 10Q. Firm A supplies detergent and has a cost function given by TC(Q) = 10Q²
a) assuming that firm A is a monopolist in Tanzania what is the profit maximizing quantity and price?
b) Now assume that firm A can produce for two different countries Tanzania and Kenya. Demand in kenya is given by P(Q) = 50 - 20Q. Assume firm A is a monopolist for both markets, what is the optumal price and quantity for each markets under third degree of price discrination?
a) The profit maximizing quantity and price for firm A in Tanzania is Q = 4.5 and P = 55.
b) Under third degree of price discrimination, the optimal price and quantity for Tanzania is P = 55 and Q = 4.5, and for Kenya is P = 30 and Q = 2.5.