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The demand curve for product 1 is Q1-100 p. Demand for product 2 is fixed at 1,000, provided p2 S14. If good 1 is produced on its own, fixed costs are $2,000 and marginal cost is $20. If good 2 is produced on a stand-alone basis, fixed costs are $3,000 and marginal cost is $10. If the two products are produced together, total fixed costs are $4,500 and the marginal costs are unchanged.
a. What are the Ramsey prices?
b. Are the Ramsey prices subsidy free? Explain
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