A monopolist 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