One unit of zinc and one unit of copper are needed to produce a unit of brass.The world's supply of zinc and the world's supply of copper are owned by two different monopolists.For simplicity assume that it costs nothing to mine zinc and copper, that no other inputs are needed to produce brass, and that the brass industry operates competitively.Then the price of a unit of brass equals the cost of the inputs used to make it.The demand function for brass is q = 900 - 2p, where p is the price of brass.The zinc and copper monopolists each set a price, believing that the other monopolist will not change its price.What is the equilibrium price of brass?
A)$100
B)$200
C)$300
D)$50
E)$25

Question

Quizplus · Accepted Answer

Given the demand function for brass is $q = 900 - 2p$, where $p$ is the price of brass, and knowing that the price of brass equals the cost of the inputs (zinc and copper), we can infer that in equilibrium, the monopolists will set prices to maximize their profits, considering the demand for brass. Since both monopolists have market power and their inputs are required in fixed proportions, they will take into account how their pricing affects the total cost of brass and thus its demand. The equilibrium price must balance these considerations, and without explicit costs given for zinc and copper, we infer the equilibrium price from the demand function and the setup that suggests a strategic interaction leading to a higher price than marginal cost (which is zero). The correct answer reflects the equilibrium price that would emerge from such strategic behavior and the given demand function, which is $300, considering the competitive nature of the brass industry and the monopolistic control over inputs.

One Unit of Zinc and One Unit of Copper Are