Question
Can someone help me with this question? Assume that a monopolist sells a critical input, E, at a unit price, e, to an industry consisting
Can someone help me with this question?
Assume that a monopolist sells a critical input, "E", at a unit price, "e", to an industry consisting of perfectly competitive downstream firms. The marginal cost of upstream output is 20. It takes one unit of the input to make one unit of downstream output. There are no other variable inputs in downstream production. The downstream industry faces a market demand curve given by Q = 100 - P.
Write the profit function of a vertically integrated monopolist of the downstream market.
Calculate the downstream monopolist's profit if it picked the level of output that maximizes profits.
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