Suppose that a company produces an intermediate good that is used in the production of a good

Question:

Suppose that a company produces an intermediate good that is used in the production of a good for final sale. The demand equation the final good is Q P f f = 1,500 −15 .

The total cost of producing the final good is TC Q f f = 100 + 2 2 .

The total cost of producing the intermediate good is TCi = 50 + 0.02Qi2 .
There is no external market for the firm’s intermediate good.

a. What is the profit-maximizing price and quantity the final good?

b. What is the transfer price of the intermediate good?

c. What is the company’s maximum profit?

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