8. There are two products - A and B - that are sold by two separate subsidiaries of the A-B Corp. (ABC). The demand for the two products is given by: QA=30-0.5PA; and QB=50-0.5PB-0.5PA, where Q is the number of units sold per day and P is the price in dollars. Suppose that the marginal cost of each product is constant and is equal to $4 per unit produced. a. Suppose that the manager of each subsidiary is instructed simply to maximize the profits of her subsidiary (and the manager of the B subsidiary is told what PA will be before she sets the price for item B). What will the prices of the two items be? Explain. b. Suppose that the two subsidiaries are consolidated into a single unit, and the manager of the consolidated unit is instructed to maximize the profits of the consolidated unit. What will the prices of the two items be? Explain. c. Does ABC make higher profits under the separate subsidiary arrangement or under the consolidated arrangement? Explain.

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