Exam Question 4 A supplier of metal aluminium serving a Coca-cola bottler in a large country in Latin America builds a plant along with associated production equipment at an annualised investment cost of Not yet 20 million per year. The plant is located directly next to the Coca- Cola bottler's bottling factory, which economises on transportation costs. The marginal cost of producing a can is $0.4 per answered can. Under a proposed contract, Coca-cola will pay the supplier $1 per can to produce 138 million cans per year. However, if the can supplier does not sell cans to the Coca-Cola bottler, its Marked out of 50.00 best available alternative is to sell cans to a Pepsi bottler. The Pepsi bottler would pay the same price for cans that Coca- Cola would pay and would buy the same number of cans. Even though the Pepsi bottler is the closest bottling operation to Coca-cola's, it is located nearly 1,000 miles away, which makes the marginal cost to the can company of selling to Pepsi $0.49 per can For your answers, please do not answer in millions i,e, if your answer is 6500000 you say 6.5 Is there a relationship-specific investment in this case? yes no What is the can producer's rent under the contract with Coca-Cola? What is the can producer's quasi-rent? Suppose the Coca-cola bottler and the can producer sign a contract at the price of $1 per can, but then the Coca-cola bottler attempts to hold up the can producer. What is the smallest price the can producer would be prepared to accept from the Coca-cola bottler? Previous page Next page MacBook Air esc 29 F2 80 F3 888 4 44 17 DI FB F10 @ CO O delete W tab R Y U P caps lock 4 5 D G J shift X C N M alt 36 alt control option command command option