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April 23, 2014

Homework Help: college

Posted by vvbnv on Sunday, April 11, 2010 at 1:49pm.

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?

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