PERFORMANCE EVALUATION - Economics Computer Company assembles personal computers and sells them in the retail marketplace....

PERFORMANCE EVALUATION - Economics

Computer Company assembles personal computers and sells them in the retail marketplace. The company is organized into two profit centers: the assembly division and the distribution division. The demand curve facing the company (and the distribution division) is P = 3,500 – 10Q. The marginal cost for assembly (which includes purchasing the parts) is constant at $450. The distribution division faces constant marginal distribution costs of $50 per unit.

A. What is the profit-maximizing retail price and output for the firm as a whole?

B. If the assembly division has monopoly power to set the transfer price, what transfer price will it select (assuming it knows all the information above)? Calculate the profits for the two-divisions in this case.

Answers should be one-two paragraphs long, or at least 5-7 sentences.

Expert Solution

Rahul Sunny answered 2 years ago

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