Motorcycles USA is a company that manufactures and sells motorcycles in North America. It has the following demand function for its motorcycles:
P = 30,000 - 100Q
Motorcycles USA has a marginal cost (MC) that is constant and equal to $4,000.
What will Motorcycles USA's price be if it decides to sell the motorcycles by itself? What will the price be if it sells them though MC Dealership, LLC an independent distributor?
Consider that when Motorcycles USA contracts with MC Dealership, LLC, it takes into account that MC Dealership, LLC faces the same demand curve. Assume that (MC) is constant and equal to $4,000.
What is the impact of distributing the motorcycles through MC Dealership, LLC on the price of the motorcycles?
Be sure to explain and interpret your calculations.