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

question 20

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. What is the effective marginal cost of selling a unit of good A?

• A) $5
• B) $4
• C) -$5
• D) -$9

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Definitions:

Consolidated Income Statements

A financial statement that aggregates the income statements of a parent company and its subsidiaries to show the total earnings and financial performance of the entire group.

Protectionism Law

Legislation intended to protect domestic industries from foreign competition through tariffs, quotas, or other restrictions.

Importation

The process of bringing goods or services into a country from abroad for the purpose of selling.

Indirect Quote

Exchange rate expression showing the amount of foreign currency required to buy or sell one unit of the home currency.