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Consider an industry with two products A and B. There are 100 consumers who value product A at vA=120 and product B at vB=280. The

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Consider an industry with two products A and B. There are 100 consumers who value product A at vA=120 and product B at vB=280. The incumbent firm 1 produces both goods. Its marginal cost of production for good A is cA=80 and cB1=150 for good B. Suppose the incumbent rm 1 offers the two products as a bundle at a price p1. There is also a potential new entrant rm 2 who only produces good B at a marginal cost of cBZ=80. Firm 2 charges a price p2 for good B. The rms compete in prices for the consumers. Which of the following statements is correct? 0 Firm 2 serves all consumers charging a price p2 = 110. O Firm 1 serves all consumers charging a price p1 = 170. O Firm 2 serves all consumers charging a price p2 = 60. O Firm 1 serves all consumers charging a price p1 = 30. 0 None of the above

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