Amonopolist sells in two different markets and charges the same price of $10 in both markets. in market a, the demand curve is described by qd = 50 – 2p. in market b, the demand curve is described by qd = 60 – p. if the monopolist lowers prices by $1 in the market with the more elastic demand and raises prices by $1 in the market with the more inelastic demand curve, by how much does its total revenue change? a) $27 b) $459 c) $767 d) $308

TR change= -$27

Explanation:

solution

first we take market A

Qd = 50 – 2P

same price P = $10

and  Qd = 30

So than TR will be

TR  = P × Q

TR = $10 × 30

TR = $300

and

for Market B are  

Qd = 60 – P

same price P = $10

and Qd = 50

so that TR will be

TR = P× Q

TR  = $10 × 50

TR  = $500

so that TR in both market will be

TR in both market = $300 + $500

TR in both market = $800

and monopolist lowers prices by $1

so that

so in market A  Qd = 50 - 2(9)

market A  Qd  = 32

and

TR = $9 × 32 = $288

and

so monopolist raises prices by $1

so that

market B Qd = 60 - 11

market B Qd = 49

TR = $11  × 49 = $539

so that

TR in both market will be = $288 + $539

TR in both market = $827

and TR change is

TR change= $800 - $827

TR change= -$27

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