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:

Seminoles

A Native American people originally of Florida, known for their resistance against the United States in the early 19th century, resulting in the Seminole Wars.

Second Seminole War

A conflict from 1835 to 1842 in Florida between the United States and the Seminole Native Americans, marking the longest and most costly of the Indian Wars in U.S. history.

Plains Indians

Native American tribes who inhabited the Great Plains of North America, known for their nomadic lifestyle and reliance on buffalo hunting.

Permanent Residences

Dwellings where individuals live on a long-term basis, as opposed to temporary or vacation homes.