Consider a Weapons Producer That Is Selling Guns to Two

Consider a weapons producer that is selling guns to two countries that are at war with one another.Guns can be produced at a constant marginal cost of $10 per gun.The demand for guns in each of the countries is given by:
p = 50 - 0.5Q (Country
A)
p = 20 - 0.25Q (Country
B)
a.If the weapons producer can charge different prices to each country,what price and quantity will it sell to each?
b.If the weapons producer cannot price discriminate,what price and quantity of guns will it sell to each country?
c.Will the weapons manufacturer make more profit from price discriminating? Briefly explain.Why is it that the manufacturer will likely be able to price discriminate?
d.Which country will benefit from price discrimination? Which country will be worse off from price discrimination? Explain briefly.
e.Is the deadweight loss higher under price discrimination or a single-price? Show mathematically.

Correct Answer:

Verified

a.Q^A = 40,P^A = 30
Q^B = 20,P^B = 15
b.Write de...

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