Suppose there exist a manufacturer and a retailer in the market. Retailer has to pay ?௪...

Suppose there exist a manufacturer and a retailer in the market. Retailer has to pay ?௪ per unit of output it purchases from the manufacturer and sells to the market at a price ?. Let the market demand be ? = 10 − ? and the MC of the manufacturer is ? = 2.

a) Find the prices set by the manufacturer (?௪) and by the retailer (?) and find their profits.

b) If they decide to merge, what will be the joint profit? Compare this with the total profit you found in part a.

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Expert Solution

Dear Student/ Learner, it was my great pleasure to help you solving this problem. I wish you best luck for your learning endeavour.
Happy Learning

Rahul Sunny answered 3 months ago

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