1: A monopolist manufacturer sells to a monopolist retailer. Suppose the final consumer demand for the good at the retailer level is P = 200 - 4Q and the costs for the manufacturer of producing the good are represented by TC = 40Q + 10. The wholesale price is the only cost of the retailer. Calculate the profit of the retailer and of the manufacturer.

2: You are the manager of the unique supermarket of the town. A local company wants you to sell its milk. But you have already many other milk offerings in you supermarket. You estimate that you would be able to sell 500L/day of this milk at p = 2. You know that the marginal cost of the local company is 0.5$/L but the manager propose the milk at 1$/L (and will never accept to sell it for less).

a. What will be your profit if you accept the deal?

b. What kind of tariff can you propose to the local company in order to improve your profit?

c. What is your maximal profit in this case?