1. You produce good X and you are considering the purchase of the store immediately next to you which produces a complementary good, Y. You anticipate this purchase will increase your profitability by 25%. Briefly explain what you believe about both goods and how your profitability would increase.
2. The Lerner Index is .27. Find the markup over marginal cost.
3. An industry commonly suggests using a markup factor or 8.8 to price goods. Find the industry Lerner Index.