Facts:

Company A: Price=12; Marginal Cost=9; Market Share=45%

Company B: Price=9; Marginal Cost=6; Market Share=30%

Industry |e| = 1.5

*remaining Market Share (25%) is distributed among two other firms.

Given the above set of facts, answer the 3 questions below:

i. For the two companies, are either, both or neither selling at the right margin (show calculations)? Briefly explain your answer.

(15 points)

ii. Recommend a new price(s) where necessary (show your calculations). Explain your reasoning.

(10 points)

iii. Discuss any limitation to your analysis.

(5 points)