N5 Questions 12 and 13Firms and markets often co-exist. By interacting in a market, a firm can increase its profit comparedto only conducting internal transactions. Figure 1. provided in the answer booklet, illustrates thesituation for a firm with two divisions. The firm's upstream division incurs a marginal cost MCywhen producing some good that can be used as an input by the downstream division. The upstreamdivision can also sell its production in an external market. The firm's downstream division has amarginal revenue MR, when selling to end-consumers. This downstream division can purchase itsinput requirement from the upstream division and suppliers in the external market. The marketprice is P.12) Illustrate in Figure I the firm's profit when its divisions are allowed to buy and sell in theexternal market.13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in theexternal market.Question 12Question 13Figure IFigure 2QuantityQuantityVAShapeCanvasLayoutEditBackground

Lets assume that the market is perfectly competitive and when demand is equal to supply, then in a…

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12) Illustrate in Figure 1 the firm's profit when its divisions are allowed to buy and sell in the external market. 13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in the external market.