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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?

  1. SupposeamonopolistMsellstwoproducts,AandB.DemandforAisqA=1000pA0.5pB,andthedemandforBisqB =1000pB0.5pA.
    1. AreAandBcomplementsorsubstitutes?
    2. IfthemarginalcostsofbothAandBarezero,whatareprofitmaximizingprices?
    3. IfBwassoldbyaseparatefirm,butatthesamepriceasyoufoundin(b),wouldMraiseorloweritspriceforA?

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