2. The Xerxes Company is composed of a marketing division and a production division. The marketing division packages and distributes a plastic item made by the production division. The demand curve for the finished product sold by the marketing division is P = 200 - 30 where P, is the price in dollars per pound) of the finished product and Q, is the quantity sold in thousands of pounds). Excluding the production cost of the basic plastic item, the marketing division's total cost function is TC = 100 + 150, where TC is the marketing division's total cost in thousands of dollars). The production division's total cost function is TC, = 5 + 3Q4 + 0.40,2 where TC is total production cost (in thousands of dollars) and Q, is the total quantity produced of the basic plastic item in thousands of pounds). There is a perfectly competitive market for the basic plastic item, the price being $20 per pound. a. What is the optimal output for the production division? b. What is the optimal output for the marketing division? 399 CHAPTER 10: BUNDLING AND INTRAFIRM PRICING c. What is the optimal transfer price for the basic plastic item? d. At what price should the marketing division sell its product