Frank Buckley Sells His Famous Bad Tasting But Very Effective Cough Medicine In Toro 3345530

Frank Buckley sells his famous bad tasting but very effective cough medicine in Toronto and Montreal, producing the syrup at a plant in Kingston, about halfway between the two cities. Annual demand in the two cities is given by P_T=18-Q_T, and P_M=14-Q_M. The MARGINAL COST of producing cough syrup is given by MC=1+2Q (TC=10+Q+Q^2) where Q=Q_M+Q_T. Q is measured in millions of bottles, and P is measured in Canadian $. a) Compute the optimal price in Toronto and Montreal if the two markets are separate (3rd Degree price discrimination IS possible) b) Compute the optimal price if Toronto and Montreal are jointly considered one market (3rd Degree price discimination is NOT possible) c) Compare Frank’s profits between cases a) and b). PLEASE BE CLEAR WITH HAND WRITING AND SHOW ALL STEPS!!

Prof. Angela


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