Question: Question 3 (Double Marginalization) Suppose that Michelin is the only producer of tires and Toyota the only producer of cars. The demand function for

Question 3 (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 plus a bundle of inputs. Toyota can obtain this bundle of inputs at a (constant) cost of $6. Suppose first that Michelin and Toyota are just two departments within the same vertically integrated monopoly (Firm V).

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