Question
Suppose the DOJ wants to test if products A and B are sufficiently broad to constitute a relevant product market, using the Hypothetical Monopolist Test.
Suppose the DOJ wants to test if products A and B are sufficiently broad to constitute a relevant product market, using the Hypothetical Monopolist Test. Assume that pA = pB = 60, mcA = mcB = 20, and qA = qB = 1000. For every $1 increase in the price of product A, A loses 20 units of sales to B, and loses 30 units of sales to products outside the candidate market.
a. If A and B are owned by a hypothetical profit-maximizing monopolist, would the monopolist's profit increase if it raises product A's price by 5%? b. According to the Hypothetical Monopolist Test, can we say that the products A and B are sufficient enough to constitute a relevant product market?
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