Monopoly Supplier and Manufacturer

Monopoly Supplier and Manufacturer

The following questions refer to the accompanying diagram, which shows a monopoly leather supplier selling leather to a monopoly shoe manufacturer. The leather supplier initially produces QM and charges the shoe manufacturer PM. Then the leather supplier acquires the shoe manufacturer in a vertical merger.


-Refer to Monopoly Supplier and Manufacturer.After the merger,the leather supplier will

A) continue to produce Q_M.
B) reduce its production from Q_M to force the shoe manufacturer to pay higher prices.
C) increase production to Q_C.
D) produce more than Q_M but less than Q_C.