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 marginal revenue for the downstream firm is: A) MR_d(Q) = 150 − 2Q. B) MR_d(Q) = 150 − Q. C) MR_d(Q) = 140 − 2Q. D) MR_d(Q) = 140 − Q.

Question

Quizplus · Accepted Answer

Marginal revenue (MR) is calculated from the inverse demand function, P = 150 - Q, by doubling the slope of the demand curve. Thus, MR = 150 - 2Q.

Suppose That the Inverse Demand for a Downstream Firm Is