The residents of Seltzer Springs, Michigan consume bottles of mineral water according to the demand function D(p) = 1,000 – p. Here D(p) is the demand per year for bottles of mineral water if the price per bottle is p. The only distributor of mineral water in Seltzer Springs, Bubble Up, purchases mineral water at c per bottle from their supplier Perry Air. Perry Air is the only supplier of mineral water in the area and behaves as a profit-maximizing monopolist. For simplicity, we suppose that it has zero costs of production. Show your work.
What is the equilibrium price charged by the distributor Bubble Up?
What is the equilibrium quantity sold by Bubble Up?
What is the equilibrium price charged by the producer Perry Air?
What is the equilibrium quantity sold by Perry Air?
What are the profits of Bubble Up?
What are the profits of Perry Air?
How much consumers’ surplus is generated in this market?
