Question-3 Consider the following highly simplified picture of the personal computer industry. A large number of price- taking firms assemble computer systems; call them computer OEMs (Original Equipment Manufacturers). Each of these firms must buy three inputs for each computer system that it sells: (1) a variety of components that are themselves supplied competitively and collectively cost the computer OEM $4 per computer; (2) the Windows operating system, available only from Microsoft, at a price pM, and (3) a Pentium microprocessor, available only from Intel, at a price a 1);. Since each computer system requires precisely one operating system and one microprocessor, the marginal cost of a computer to an OEM is 4 + pM + p; . Assume that OEM market is perfectly competitive and let p denote the price of a computer system. The demand for computer systems is given by Q = 456 6p. Microsoft is the sole supplier of the Windows operating system for personal computers. The marginal cost to Microsoft of providing Windows for one more computer is $1. Intel is the sole supplier of the Pentium microprocessors for personal computers. The marginal cost to Intel of a Pentium microprocessor for one more computer system is $2. (a) Suppose that Microsoft and Intel simultaneously and independently set the prices for Windows and Pen- tium chips, pM and p1 . What are the prices, pM and p1 ? (b) What is the final price the consumers pay (c) What is the quantity demanded (d) what are the profits of the OEM, Microsoft, and Intel (e) Now suppose that Microsoft and Intel sit down and form ajoint venture with an agreement to sell Windows and Pentium chips as a package to computer OEMs for a package price of 101']. What package price would maximize Microsoft's and Intel's combined profits? By how much would an agreement between Microsoft and Intel boost their combined profits? (f) Would final consumers benefit from such an agreement between Microsoft and Intel, or would they be harmed? What about computer OEMs? Relate your answer to your calculations in parts (a) and (b), and explain the economic principles underlying your