A retail market has an inverse demand function PR = 100-Q. The market is monopolized by a retailer who buys the product from a monopolist wholesaler at price Pw; the wholesaler buys the product from a monopolist manufacturer at price Pm. The manufacturer's marginal cost is 10. 4.1. Illustrate graphically this situation with three monopolists vertically linked. 4.2. Find the profit maximizing quantities and prices. 4.3. Prove graphically that the merger between two monopolists increases profits and consumer's surplus.
A retail market has an inverse demand function PR = 100-Q. The market is monopolized by a retailer who buys the product from a monopolist wholesaler at price Pw; the wholesaler buys the product from a monopolist manufacturer at price Pm. The manufacturer's marginal cost is 10. 4.1. Illustrate graphically this situation with three monopolists vertically linked. 4.2. Find the profit maximizing quantities and prices. 4.3. Prove graphically that the merger between two monopolists increases profits and consumer's surplus.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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Transcribed Image Text:A retail market has an inverse demand function PR = 100-Q. The market is monopolized by
a retailer who buys the product from a monopolist wholesaler at price Pw; the wholesaler
buys the product from a monopolist manufacturer at price Pm. The manufacturer's marginal
cost is 10.
4.1. Illustrate graphically this situation with three monopolists vertically linked.
4.2. Find the profit maximizing quantities and prices.
4.3. Prove graphically that the merger between two monopolists increases profits and
consumer's surplus.
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