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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The Answer of 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?

American Tire and Rubber Company Sells Identical Radial Tires Under