Mac Ltd. is a monopoly in the production of tennis shoes in the town of FreeCompete. The marginal cost of producing shoes is $18. Mac Ltd., however, does not have the facilities for selling the shoes to consumers, so it sells them wholesale to a firm that, in turn, sells the shoes to consumers in a monopoly retail market. The costs for selling shoes faced by the retail firm include the wholesale price of the shoes (PW) and the marginal retail costs of $10. The consumer demand for tennis shoes in FreeCompete is given by P = 100-Q.

Note: The MR curve is twice as steep as the demand curve.

a)What are the wholesale and retail prices of tennis shoes? What are the profits earn by Mac Ltd. and the retail firm?