Two different boutique wineries supply two towns: town A and town B. Winery 1 supplies town A and Winery 2 supplies town B. Both wineries have a constant marginal cost c = 20. Assume that consumers are indifferent between the wines from different wineries and that they purchase wine only in the town they live. Demand for wine in town A is given by pA=40−12qA; the demand for wine in town B is given by pB=70−qB. a) Find the price p1, quantity sold q1, and profit π1 of Winery 1 in town A. b) Find the price p2, quantity sold q2, and profit π2 of Winery 2 in town B. c) Assume that the two wineries decide to merge (i.e. to unite) and become Winery Co. The Winery Co sells wine in both towns at the same price (i.e. the price of wine in town A is the same as the price of wine in town B). The marginal cost is still equal to 20. What is the total demand for wine from the residents of both towns? Find the price pM, quantity sold in each town (qA and qB) and the total profit πM of Winery Co.
Two different boutique wineries supply two towns: town A and town B. Winery 1 supplies town A and Winery 2 supplies town B. Both wineries have a constant marginal cost c = 20.
Assume that consumers are indifferent between the wines from different wineries and that they purchase wine only in the town they live. Demand for wine in town A is given by pA=40−12qA; the demand for wine in town B is given by pB=70−qB.
a) Find the
b) Find the price p2, quantity sold q2, and profit π2 of Winery 2 in town B.
c) Assume that the two wineries decide to merge (i.e. to unite) and become Winery Co. The Winery Co sells wine in both towns at the same price (i.e. the price of wine in town A is the same as the price of wine in town B). The marginal cost is still equal to 20.
What is the total demand for wine from the residents of both towns? Find the price pM, quantity sold in each town (qA and qB) and the total profit πM of Winery Co.
d) Compare profits made by Winery Co to the sum of profits of both wineries before merger. Is it a successful merger? Why or why not? What is the economic reason for this result? Explain.
e) Winery Co hired an expert who advised them to introduce 3rd degree
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The demand for wine in town A is actually pA=40−1/2qA; NOT 12qA.
Coudl you please let me know how that changes the asnwer?
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