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Consider two independent firms, BU1 and BU2, which transact with each other through spot market transactions in a competitive market. In a typical year, BU1
Consider two independent firms, BU1 and BU2, which transact with each other through spot market transactions in a competitive market. In a typical year, BU1 incurs total costs of $2 million in producing goods that BU2 buys. BU2 would be willing to pay up to $7.5 million for these goods, but because of the competitive market, ends up paying $5 million. What is the value captured by BU1 from these transactions?
Group of answer choices
$7.5 million
$5.5 million
$3 million
None of these is correct
$2.5 million
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