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The following shows the demands and marginal revenue in two markets, 1 and 2, for a price discriminating firm along with total marginal revenue, MRT, and marginal cost MC.
a. Compare the demand conditions in each market; i.e. how do the two markets differ in their demand for the firm’s product?
b. How much total output should the firm produce (for both markets combined)? How should that output be allocated between markets 1 and 2? (It would be easiest to copy and paste the picture above and draw directly on the picture using Insert, Shapes to do parts b and c.)
c. What price should the firm charge in each market?
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Company A owns a patent with 15 years of remaining life. Company B is paying royalties to Company A for a license to the patent. It is estimated that royalty payments for the next 15 years will be $6,000 per year for the first 5 years, $8,000 per yea..
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