Problem 4. Suppose you own a hypothetical company, which is the monopoly seller of printers (a
durable good) and the ink cartridges (a consumable) that are used with the printer. For simplicity,
suppose that only the company’s cartridges can be used with the company's printers.
costs $150 to produce and each cartridge costs $10 to produce.
customers for this company.
All potential consumers
the use of cartridges (and not from the printers).
Each printer
Suppose there are 100 potential
are identical and
receive utility only from
More specifically, the utility that each customer
receives from using x units of cartridges is given by:
Vp (a) =
(100-#)2
x < 100
5000
az >
.
100
(1) For this question only, suppose that you decide to give out printers for free.
should you charge per cartridge? What is the resulting profit per customer?
answer in the boxes below.
(The picture below is offered for your convenience.
How
Provide your
So you do
not have to use it if you do not need one, i.e., no penalty for not using the picture.)
marks)
Price per Cartridge:
Profit:
120
no
100
%
80
7
oo
0
“0
»
10
oo
0
2%
W050
60
70
80
97
100 110
120
much
(15