The demand functions for a product of a firm in domestic and foreign markets are:
1
Q = 30 - 0.2P.
-
QF = 40 – 0.5PF
The firms cost function is C=50 + 3Q + 0.5Q2, where Qo is the output produced for
domesti
a) Determine the total output such that the manufacturer’s revenue is maximized.
b) Determine the prices of the two products at which profit is maximised.
c) Compare the price elasticities of demand for both domestic and foreign markets when profit is maximised. Which market is more price sensitive?