Asked by vvbnv
American Tire and Rubber Company sells identical radial tires under the firm's own brand name and private
label tires to discount stores. The radial tires sold in both sub-markets are identical, and the marginal cost is
constant at $10 per tire for both types. The firm has estimated the following demand curves for each of the
markets.
PB = 70 - 0.0005QB (brand name)
PP = 20 - 0.0002QP (private label).
Quantities are measured in thousands per month and price refers to the wholesale price. American currently
sells brand name tires at a wholesale price of $28.50 and private label tires for a price of $17. Are these prices
optimal for the firm?
label tires to discount stores. The radial tires sold in both sub-markets are identical, and the marginal cost is
constant at $10 per tire for both types. The firm has estimated the following demand curves for each of the
markets.
PB = 70 - 0.0005QB (brand name)
PP = 20 - 0.0002QP (private label).
Quantities are measured in thousands per month and price refers to the wholesale price. American currently
sells brand name tires at a wholesale price of $28.50 and private label tires for a price of $17. Are these prices
optimal for the firm?
Answers
Answered by
Ms. Sue
Your school subject is <u>Economics</u>.