The market for ice cream includes two major players in the market: milk producers and ice cream producers. For the purposes of this question, Joe's Ice Cream only buys milk from Bob's Milk, and Bob's Milk only sells to Joe's Ice Cream. The following diagram shows their value chain relationship: Bob's Milk Joe's Ice Cream Demand MC=ATC=1 MC=ATC=2 +PMILK Qd =100-10P Qd =50-10P

a. Assuming that Bob's Milk is a monopoly, what is their profit? N

b. Assuming that Joe's Ice Cream is a monopoly, but Bob's Milk is in a perfectly competitive market for milk, what is the profit of Joe's Ice Cream? N

c. Assuming that Joe's Ice Cream and Bob's Milk are monopolies, what is Joe's Ice Cream's profit? N

d. If Joe's Ice Cream and Bob's Milk are both monopolies and they choose to vertically integrate, their new cost function is MC=ATC=3. What is the profit of this vertically integrated firm? N

e. If they are both monopolies, should they vertically integrate? If Joe's Ice Cream was a monopoly but Bob's Milk was in a perfectly competitive market should they vertically integrate?

Confused on solving for profit for competitive market compared to a monopoly