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Question - A firm sells a product on two markets.
A demand on domestic market: P1 = 100 - 5Q1.
A demand on the foreign market: P2 = 200 - Q2.
Total cost function is TC = 6,000 + 20Q, where Q = Q1 + Q2.
What would be the profit maximizing combination of sells in two markets? Using the second order conditions prove that this combination corresponds to the maximum.
In the profit maximizing case what are the values of the optimal prices in two markets? What are the corresponding values of the revenues, cost and profit?
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