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(Solution document) Suppose a firm offers two product, word processor and spreadsheet, and produces each at a marginal cost of zero. There are two consumers:


 

Suppose a firm offers two product, word processor and spreadsheet, and produces each at a marginal cost of zero. There are two consumers: Marge values a word processor at $110 and a spreadsheet at $120, while Ned values a word processor at $100 and a spreadsheet at $120. 


a. Can the firm make more money by selling these two products as a bundle than by selling them separately? Why does this work in this case, or why doesn't it work? 

 







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