Rather than the marginal costs for Problem 1, MCu = 30 and MCd = 30. The inverse demand curve remains P = 150 – 0.1 x Q. At what price does the upstream firm sell the input to the downstream firm? What is the downstream output? What is the downstream price? What are the upstream firm’s profits? What are the downstream firm’s profits? What is the consumer surplus?
Added by Jose Maria L.
Step 1
To do this, we can set the inverse demand curve equal to the inverse of the total cost function for the downstream firm. The total cost function for the downstream firm is given by TCd = MCd * Qd. Show more…
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