Tight-Sleep, . It sells its brand of sleeping pills
named Managerial Economics both in Asia and in Europe. Now-Sleep estimate the daily demand in Asia and Europe, which turned out to be:
QA = 60 - PA and QE = 44 - PE
where QA(QE) is the quantity of the sleeping pills demanded in Asia(Europe) and PA (PE) is the unit
price of the sleeping pills in Asia(Europe). Now-Sleep’s average total cost (ATC) of producing
sleeping pills is:
ATC = 4 + 0.1QT, where QT = QA + QE
is the total number of sleeping pills produced by

Question

Tight-Sleep, . It sells its brand of sleeping pills
named Managerial Economics both in Asia and in Europe. Now-Sleep estimate the daily demand in Asia and Europe, which turned out to be:
QA = 60 - PA and QE = 44 - PE
where QA(QE) is the quantity of the sleeping pills demanded in Asia(Europe) and PA (PE) is the unit
price of the sleeping pills in Asia(Europe). Now-Sleep’s average total cost (ATC) of producing
sleeping pills is:
ATC = 4 + 0.1QT, where QT = QA + QE
is the total number of sleeping pills produced by

anonymous · Answer

If Now-Sleep can successfully prevent arbitrage resale between the two markets,
what quantities under what prices should the firm sell in each region? And what would be the
maximum profit level that could be achieved under such a policy?
(Assume that each region prohibits the firm from charging different prices for different
consumers or different units ‘in each region’. That is, only the third-degree price
discrimination is considered.)
(2) (20 marks) Suppose that Singapore signed an international trade agreement with