Suppose a Multi-Product Monopolist Sells Two Complementary Goods,A and B

question 23

Multiple Choice

Suppose a multi-product monopolist sells two complementary goods,A and B. Annual market demand for good A is Q^d_A = 600 - 25P_A - 12P_B. Each time a consumer buys A, his demand for B is Q^d_B = 4 - 0.4P_B. The marginal cost of good A is a constant $4, and the marginal cost of good B is a constant $0.50. Suppose the price of good B is $5. If the monopolist considers the effect of additional sales of A on the sales of good B, what will be its total profit from the sales of A and B?

• A) $7,414.75
• B) $5,752.25
• C) $4,422.25
• D) $1,429.75

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Definitions:

Cost Leadership

A business strategy aimed at becoming the lowest cost producer in an industry, often resulting in competitive pricing.

Product Differentiation

The process of distinguishing a product or service from others in the market to make it more attractive to a particular target market.

Single Segments

Targeting a marketing strategy or campaign toward a specific, narrowly defined segment of the market, allowing for a more focused and personalized approach.

Growth Stage

A phase within the product life cycle characterized by rapid market acceptance and increasing profits.