Question
In: Economics
Question (Double Marginalization) Suppose that Michelin is the only producer of tires and Toyota the only...
Question (Double Marginalization)
Suppose that Michelin is the only producer of tires and Toyota the
only producer of cars. The demand function for cars is given by Q =
40 − 4P. Michelin's (constant) cost of production for a set of five
tires is 3. The production of one car requires a set of five tires
and a bundle of inputs, which Toyota can obtain at a price of
6.
- Suppose first that Michelin and Toyota are just two departments
within the same firm.
1. (a) What price would the firm charge for cars and how many cars would it produce?
- Suppose now that Michelin and Toyota are separate firms. Michelin quotes a price w for a set of five tires and Toyota decides how many sets to buy at that price.
2. (b) What price will Michelin set? How many cars will Toyota sell and at what price?
3. (c) Are consumers better off when Michelin and Toyota are an integrated firm [Part (a)] or when they are separate firms [Part (b)]?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Question (Double Marginalization) Suppose that Michelin is the only producer of tires and Toyota the only...
Question (Double Marginalization)
Suppose that Michelin is the only producer of tires and Toyota the
only producer of cars. The demand function for cars is given by Q =
40 − 4P. Michelin's (constant) cost of production for a set of five
tires is 3. The production of one car requires a set of five tires
and a bundle of inputs, which Toyota can obtain at a price of
6.
- Suppose first that Michelin and Toyota are just two...
Suppose that Michelin is the only producer of tires and Toyota the only producer of cars....
Suppose that Michelin is the only producer of tires and Toyota
the only producer of cars. The demand function for cars is given by
Q = 40 − 4P. Michelin's (constant) cost of production for a set of
five tires is 3. The production of one car requires a set of five
tires and a bundle of inputs, which Toyota can obtain at a price of
6. Suppose first that Michelin and Toyota are just two departments
within the same...
Suppose that Michelin is the only producer of tires and Toyota the only producer of cars....
Suppose that Michelin is the only producer of tires and Toyota
the only producer of cars. The demand function for cars is given by
Q = 40 − 4P. Michelin's (constant) cost of production for a set of
five tires is 3. The production of one car requires a set of five
tires and a bundle of inputs, which Toyota can obtain at a price of
6. Suppose first that Michelin and Toyota are just two departments
within the same...
Big O tires can sell 10,230 Michelin RG Tires per week nationally if the price is...
Big O tires can sell 10,230 Michelin RG Tires per week
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1,At what price is the maximum revenue per week
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