Slick Shades has a constant marginal cost of production equal to $80 and the distributors have a constant marginal cost of distribution equal to $30. If Slick Shades vertically integrates with the perfectly competitive distributors, the profit- maximizing quantity will be _______ the profit- maximizing quantity if they did not vertically integrate and the combined firm will earn______
Profit if they did not vertically integrate.
A)greater than; the same
B)the same as; the same
C)greater than; greater
D)the same as; greater

Question

Quizplus · Accepted Answer

The profit-maximizing quantity remains the same because vertical integration does not affect the marginal cost of production plus distribution, which remains $110 ($80 + $30). The combined firm's profit remains the same because vertical integration does not inherently increase the price consumers are willing to pay or decrease the total cost of production and distribution.

Slick Shades Has a Constant Marginal Cost of Production Equal