Computer Company assembles personal computers and sells them in the retail marketplace. The company is organized into two profit centers: the assembly division and the distribution division. The demand curve facing the company (and the distribution division) is P=3,500 - 10Q. The marginal cost for assembly (which includes purchasing the parts) is constant at $450. The distribution division faces constant marginal distribution costs of $50 per unit.

A.What is the profit-maximizing retail price and output for the firm as a whole?

B.If the assembly division has monopoly power to set the transfer price, what transfer price will it select (assuming it knows all the information above)? Calculate the profits for the two-divisions in this case.