Use the following information to answer the problem - A company sells items to customers. To do that, a raw inputs supplier sells to the intermediate process suppler which sells to the final assembly company which sells to the customer. The table below has the unit costs and prices. The Intermediate Processor has $10 in costs per unit above what it pays for raw inputs. Similarly, the Final Assembly has $10 in unit costs above what it pays the Intermediate Processor. The Final Assembly company marks up prices above its costs by $10 per unit. Also suppose the company sells 100 units to customers.

	Raw Inputs	Intermediate Processing	Final Assembly
MC	$5	$20	$35
MR	$10	$25	$45
Units sold =	100
	Raw Inputs	Intermediate Processing	Final Assembly
Total Costs	$500	$2,000	$3,500
Total Revenue	$1,000	$2,500	$4,500

To avoid margin stacking, the firm is considering purchasing the raw inputs supplier and the firm that does the intermediate processing and the transfer price would be the MC of each stage. If it did so, by how much could its profit increase if it kept the same price to the customer?

Answer
Input prices
	Raw Inputs	Intermediate Processing	Final Assembly
MC
MR
Units sold =	100
	Raw Inputs	Intermediate Processing	Final Assembly
Total Costs
Total Revenue
		New Profit =
		Original Profit =	$1,000