# Managerial Econ

Ann McCutcheon is hired as a consultant to a firm producing ball bearings. This firm

sells in two distinct markets, each of which is completely sealed off from the other. The

demand curve for the firm’s output in the first market is P_1=160-8Q_1, where P_1 is the

price of the product and Q_1 is the amount sold in the first market. The demand curve

for the firm’s output in the second market is P_2=80-2Q_2, where P_2 is the price of the

product and Q_2 is the amount sold in the second market. The firm’s marginal cost curve

is 5+Q where Q is the firm’s entire output (destined for either market). Managers ask

Ann McCutcheon to suggest a pricing policy.

a. How many units of output should she tell managers to sell in the second market?

b. How many units of output should she tell managers to sell in the first market?

c. What price should managers charge in each market?