Say a monopolist retailer sells its product in a market with linear demand equal to Q = 13 – P. It has no retailing costs, but it must purchase the product from a monopolist wholesaler. The wholesaler has total costs given by TC=2+Q.

At what price will the wholesaler sell the product to the retailer?

At what price will the retailer sell the product to the final customers?

If the two firms merge (or form a strategic alliance that allows them to maximize joint profits), what will happen to the final price, quantity exchanged, and joint profits? Explain.

Answer rating: 100% (QA)

Analyzing Monopolistic Retailer and Wholesaler 1 Wholesaler Price The retailer maximizes its profit by setting marginal revenue MR equal to marginal c... View the full answer