Question: Below is the cost structure of the two firms. Firm 1 Total internal Operation cost $5 Retailing price $10 raw material cost $2 ---------------------------------------------------------------------------------------------------------------------------------------------- Firm

Below is the cost structure of the two firms.

Firm 1 Total internal Operation cost $5 Retailing price $10

raw material

cost $2

----------------------------------------------------------------------------------------------------------------------------------------------

Firm 2

Total internal Operation cost $2.5 Retailing price $4

raw material

cost $ 0.5

Calculate the following (show the process of your calculation like A-B=C):

a. What are the value creation and value capture of each firm? (5 points)

Value created:

Firm1:

Firm2:

Value captured:

Firm1:

Firm2:

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