2. Suppose that BROTHER is the only seller of printers and the only firm that sells ink cartridges compatible with its printers. BROTHER faces the following two types of consumers. Each individual of type 1 uses 10 ink cartridges over the lifetime of the printer and has a valuation on the pages printed equal to 450. Each individual of type 2 uses 30 ink cartridges over the lifetime of a printer and has a valuation on the pages printed equal to 950. Assume that the marginal cost of producing printers or cartridges is zero for BROTHER and that consumers can get paper for free. a) Assume BROTHER is not allowed to bundle any cartridges with the sale for a printer. What price does BROTHER set for the printer and for cartridges? b) Same question as in a), except now assume that the marginal cost of production is 150 for a printer and is 15 for a cartridge. Now assume BROTHER only faces one type of consumers, where a consumer's valuation on a printer and cartridges is given by V(C)=100+20C for C20, and V(C)=500+12(C-20) for C>20 (C denotes the number of cartridges purchased by the consumer). Also, as in b) assume the marginal cost of producing a printer equals to 150 and the marginal cost of producing a cartridge equals to 15. c) Again, what price does BROTHER set for the printer and for cartridges? 3. Suppose that car manufacturer VW sells its model VW Golf only in Germany and Spain. It has some market power in each market, so that it faces downward- sloping demand curves QG-80,000- 4PG in Germany and Qs=43,000-2Ps in Spain. The total cost of production imputed to the VW Golf model is given by TC(Q)= 10,000,000 +10,000Q+(Q2/2), where Q-QG+Qs, and there are no shipping costs. VW controls the distribution network of new (unregistered) cars. It is possible to buy a new car in one country and re-sale it in another one, but there are a bunch of fees and taxes associated to re-registration that imposes a cost of around 3000 per car of doing so. a) What price does VW charge for the Golf model in each country? What quantities does it sell? (help: You will have to compute the inverse-demand and marginal revenue functions for each country as well as the marginal cost function in order to answer this question) b) In order to promote competition in the EU, the European Commission is trying to reduce re-registration fees and taxes. What is the minimum re- registration cost for which your answer to question a) would not change? c) Suppose that the European Commission manages to fully eliminate re- registering taxes and fees, so that the costs of buying in one country and re- selling in the other country are almost zero. What would be the new quantities sold in each market? Will all the consumers benefit from the removal of taxes and fees?