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Ken Garrett says
October 23, 2017 at 12:45 pm
The normal assumption, unless told otherwise, is that there no market formthe intermediate product. So, Div A cannot sell tomthe public. The max tp is determinedmby B and is 200 – 80, revenue less own marginal,costs. The min is set by A and is 60 the variable cost to A.
As in most short-run decision making, fixed costs are irrelevant.
Not sure what your difficulty is with Q3
October 24, 2017 at 12:41 pm
Thank you so much for breaking it down for me. I understand the principle.
October 23, 2017 at 12:25 pm
Hi. I am stuck on Q3 & Q4. Would you please advise.
My assumption on Q4. is that since A sells to B then Minimum is the $70 and the maximum should be the price that A sells the public which in this case it’s unknown.
June 2, 2017 at 7:18 pm
I think someone should post the answers in the comments. It’s really annoying that you need to get above 70% in order to review the answers.
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