Author Question: Suppose a monopoly produces film and cameras. Consumers demand pictures, which require film and one ... (Read 111 times)

TFauchery · **on:** Jul 1, 2018

Suppose a monopoly produces film and cameras. Consumers demand pictures, which require film and one camera.

Two different types of consumers have the following demand for film,
qA = 100 - 10p and qB = 80 - 10p. The monopoly cannot price discriminate in the market for film or the market for cameras, but it can bundle the products. The monopoly produces film at a constant marginal cost of 1 per roll. What price will the monopoly set for film and for cameras?

Question 2

A game includes

A) a strategy.
B) payoffs.
C) rules.
D) All of the above.

kkenney · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Profit equals (8 - p) (80 - 10p) + (p - 1)(180 - 20p).
Maximizing profit subject to p yields 20p - 160 + 180 - 40p + 20 = 0 or 20p = 40 or p = 2.
At that price, the firm charges (1/2)(8 - p)(80 - 10p) = 180 for a camera.

Answer to Question 2

D