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Suppose demand for televisions is given by P Suppose demand for televisions is given by Ptv = 30 Qtv. Each television requires one screen. Suppose
Suppose demand for televisions is given by P\
Suppose demand for televisions is given by Ptv = 30 Qtv. Each television requires one screen. Suppose the marginal cost of a television screen is 8 and the transformation costs to build a television from the screen is 2. a. b. c. d. e. Suppose the television market and screen markets are monopolized. What is the equilibrium television price? What is the equilibrium Screen price? How many televisions are sold? Suppose the television monopolist merges with the screen monopolist. What is the equilibrium television price? How many televisions are sold? Does the merger increase the monopolists' total profits? If so, by how much? What are the downstream cost efficiencies from integration as result of the elimination of double marginalization? How do you know consumers are better off after the merger between the television and screen monopolist? Suppose instead that the upstream screen market is perfectly competitive. How does your answer to part a change? Could the television monopolist increase profits by acquiring a firm that make screens? Intuitively, how would you adjust the model if vertical integration reduced transaction costs? How would this adjustment change your answer to (d)?
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