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Unformatted text preview: separate from other business segments. Question 4: The assumption that the marginal cost for the disc service doubles after the split is the main factor driving my conclusion. Additionally the demand curves for both markets were reduced equally. For the streaming video product line, marginal cost was cut in half from 2 to 1. However, for the disc rental product line marginal cost was doubled from 2 to 4. The increase in cost on the disc product line was greater than the cost savings on the streaming video line. This reduces total profit from 15 to 12.5....
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- Fall '11