Suppose That the Inverse Demand for a Downstream Firm Is

question 35

Multiple Choice

Suppose that the inverse demand for a downstream firm is P = 150 − Q.Its upstream division produces a critical input with costs of C_U(Q_d) = 5(Q_d ) ².The downstream firm's cost is C_d(Q) = 10Q.When there is no external market for the downstream firm's critical input,the downstream firm should produce:

• A) 11.67 units.
• B) 12.5 units.
• C) 14 units.
• D) 15 units.

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Definitions:

Suppliers

Entities or individuals that provide goods or services to consumers or other businesses.

Supply and Demand

Fundamental economic model illustrating how the interaction between sellers and buyers determines the price and quantity of goods or services in a market.

Price

The amount of money required to purchase a good or service, acting as a signal to both buyers and sellers in the market.

Quantity

The amount or number of a material or immaterial good that is measured or counted.