3.6 Suppose that consumer (retail) demand for a product is given by Q = 100 - P where Q is the quantity demanded and P is the price. The inverse demand curve (which gives the price as a function of the quantity demanded) is P = 100 - Q The marginal cost of production and average total cost of production are $50 per unit, and the marginal cost of distribution and average total cost of distribution are $10 per unit.

a. If the retail distribution is monopolized by another firm, find the following:

i. The profit-maximizing wholesale price and output ii. The producer’s profit iii. The retail price and quantity iv. The profit of the monopoly retailer

b. Should you vertically integrate? Explain your answer.