Suppose that you are hired as a consultant to a firm producing a therapeutic drug protected by a patent that gives a firm a monopoly in two markets. The demand schedule in the first market is P1 = 200 − 2Q1, where P1 is the price of the product and Q1 is the amount sold in the market. In the second market, the demand is P2 = 140 − Q2, where P2 is the price and Q2 the quantity. The firm’s marginal cost is 20.(1) If the firm can charge different prices in different markets, what price should it charge in each market? (2) If the firm must charge the same price in the two markets, what price should it charge?(3) Now suppose the firm’s overall marginal cost is MC = 20+Q1 +Q2. If the firm cannot price-discriminate (the same price in the two markets), what price should it charge?
