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SupposeamonopolistMsellstwoproducts,AandB.DemandforAis q A =1000 p A 0 . 5 p B ,andthedemandforBis q B =1000 p B 0 . 5 p A . AreAandBcomplementsorsubstitutes? IfthemarginalcostsofbothAandBarezero,whatareprofitmaximizingprices?

SupposeamonopolistMsellstwoproducts,AandB.DemandforAisq_A=1000p_A0.5p_B,andthedemandforBisq_B =1000p_B0.5p_A.
1. AreAandBcomplementsorsubstitutes?
2. IfthemarginalcostsofbothAandBarezero,whatareprofitmaximizingprices?
3. IfBwassoldbyaseparatefirm,butatthesamepriceasyoufoundin(b),wouldMraiseorloweritspriceforA?

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