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Exercise 1.5* A firm has monopoly power on the production of nuts (good 1) and bolts (good 2). Nuts and bolts are perfect complements. Thus,

Exercise 1.5* A firm has monopoly power on the production of nuts (good 1) and bolts (good 2). Nuts and bolts are perfect complements. Thus, demand depends only on the total price: Di(p1,p2)= D(p1+p2) for all i. Derive the first-order condition and the Lerner index.

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