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1
Name
Course
Prof
Date
2
Econ 121
Problem 1
a) To find the profit-maximizing prices and quantities for the NY and LA markets,
we maximize Sal's profit function, which is given by:
πNY = (PNY - MCNY) QNY πLA = (PLA - MCLA) QLA
Where MCNY and MCLA are the marginal costs of providing service in NY and LA respectively
They are equal:
MCNY = d(TC)/dQNY = 30 MCLA= d(TC)/dQLA = 20
Substituting the demand functions and marginal costs into the profit functions, we have:
πN...