A computer company A makes a device that is stocked by the retailer Best Buy. Both firms act as monopolists to maximize their profits. Assume that the retail demand from consumers is given by P=1000-Q. Computer Company A has constant marginal costs of $100 for making the device. Best Buy also has marginal costs comprised of $100 in labor costs + the cost of purchasing its products from the manufacturer. If Computer company A sets a producer price (= $ PA) for Best Buy, which Best Buy takes as given, what is the Best Buys marginal cost curve? the marginal cost for retailer is $100 + PA.

Solve for the profit maximizing solution of Q and P and mark up for Best Buy.

Solve Computer company As prices and quantity, mark up. What is the relation to the Lerner index for this market?

Does it make sense for company A to try and sell direct to consumer (i.e., the company tries to create its own retail network. How would demonstrate this?