3.4 Suppose that you are a manager for a firm like Hewlett-Packard and your research department has provided the data used to construct the figure, which shows the consumer (retail)

demand curve (D), marginal cost of production

(MCP), and marginal cost of distribution

(MCD) for your printers. Your firm produces the printers, which it then sells to competitive retail distributors.

a. If you do not vertically integrate, what is the wholesale price and quantity of printers?

What is the retail price?

b. If you vertically integrate by taking over the distribution of the printers, what is the retail price and quantity?

Transcribed Image Text:

Price and cost (dollars per printer) $350 $300 $250 $200 $150 $100 $50 MCP D MCD 05 10 15 20 25 30 35 Quantity (millions of printers per year)