Suppose a manufacturer is a monopoly. This manufacturer produces a good at MC = 4 and sells it to a retailer. The manufacturer has no fixed costs. The retailer is also a monopoly, and it sells the good bought from the manufacturer to consumers. The retailer has no additional costs other than the price they pay to the manufacturer. The retailer faces a demand curve P = 100-3Q, where Q is the number of units sold.
a) What price will the manufacturer charge to the retailer?
b) What price will the retailer charge to the consumers?
c) How much profit does the manufacturer make?
d) How much profit does the retailer make?
e) If the two firms merged, what would be the price charged?
f) If the two firms merged into a single firm, how much profit would the firm make?