Defendo has decided to introduce a revolutionary video game

Assignment Help Microeconomics
Reference no: EM13374832

Defendo has decided to introduce a revolutionary video game, and as the first firm in the market,' it will have a monopoly position for at least some time. In deciding what type of manufacturingp1,mt to build, it has the choice of two technologies. Technology A is publicly available,and will result in annual costs of: Ca(q)=10+8q Technology B is aproprietary technology developed in Defenders research labs. It involves higher fixed cost of production, but lower marginal costs: Cb(q)=60+2q Defendo's CEO must decide which technology to adopt. Market demand for the new product is P = 20 - Q, where Q is total industry output.

a. Suppose Defendo were certain that it would maintain its monopoly position in the market for the entire product lifespan (about five years) without threat of entry. Which technology would you advise the CEO to adopt? What would be Defendo's profit given this choice?

b. Suppose Defendo expects its archnval, Offendo, to consider entering the market shortly after Defendo introduces its new product. Offendo will have access only to Technology

A. If Offendo does enter the market, the two firms will play a Cournot game (in quantities) and arrive at the Cournot-Nash equilibrium.

(i) .If Defendo adopts Technology A and Offendo enters the market, what will be the profits ofboth fms? Would Offendo choose to enter the market given these profits?

(ii) If Defendo adopts Technology B and Offendo enters the market, what will be the profit of each firm? Would Offendo choose to enter the market given these profits?

(iii) Which technology would you advise the CEO of Defendo to adopt given the threat ofpossible entry? What will be Defendedprofit given this choice? What will be consumer surplus given this choice?

c. What happens to social welfare (the sum of consumer surplus and producer profit) as a result of the threat of entry in this market? What happens to equilibrium price? What might this imply about the role of potential competition in limiting market power?

Reference no: EM13374832

Questions Cloud

Afirm has the following production function q kl where q : a firm has the following production function q kl where q output l labour measured in person hours k capital
Suppose that the aggregate demand curve in a particular : suppose that the aggregate demand curve in a particular year is given by the algebraic expressionnbsp y 3000 1000p
1 if an economist says the higher the price of oranges the : 1. if an economist says the higher the price of oranges the fewer oranges individuals will buy ceteris paribus this
There are plenty of articles news reports on fdinbsp make a : there are plenty of articles news reports on fdi.nbsp make a proper and deep search and make a detailed analysis of
Defendo has decided to introduce a revolutionary video game : defendo has decided to introduce a revolutionary video game and as the first firm in the market it will have a monopoly
Write out the formulas for the bias variance and mean : write out the formulas for the bias variance and mean squared error of beta1. how do the bias variance and mean squared
Suppose that an oligopolistically competitive restaurant is : suppose that an oligopolistically competitive restaurant is currently serving 230 meals per day the output where mrmc.
1the accountants hired by davis golf course have determined : 1.the accountants hired by davis golf course have determined total fixed cost to be 75000 total variablecost to be
The firm currently uses 50000 workers to produce 200000 : the firm currently uses 50000 workers to produce 200000 units of output per day. the daily wage per worker is 80 and

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Question on demand type

Given a 15% raise in a good's price and a 25% decrease in quantity demanded for good by consumer, which of the following types of elasticity best describes the demand curve for the consumer?

  What will happen to the equilibrium price and quantity

Suppose you are studying the market for shoes. Two events take place simultaneously. First, price of leather decreases, and second, consumers' income increases. What will happen to the equilibrium price and equilibrium quantity of shoes

  What is the monopolists total cost function

Suppose a monopolist can purchase Labor at a price w = 36 and can purchase Capital at a price r = 25. The monopolist's production function is given by Q = L1/2K1/2. The demand facing the monopolist is given by P = 180 - 3Q. a) What is the Monopol..

  How can fertility choice be interpreted as economic problem

Explain succinctly how can fertility choice be interpreted as an economic problem. That is, identify resources and competitive ends involved in the problem of choosing how many children to have.

  Current subsidy are discussed or addressed in parliament

THE SOUTH AFRICAN GOVERNMENT IS NOT PROVIDING ENOUGH WELFARE OR SUBSIDIES TO THE POOR AND UNDERPRIVILEDGED.

  Why the firm should undertake bigger reductions

Economists argue that appropriate corrective taxes or tradable pollution rights will result in efficient pollution reduction. how do these approaches target the firms that should undertake bigger reductions

  Describe the supply and demand shifts that are occuring

The demand for the firms services has been increasing as more consumers use the service for convenience and due to higher parking rates and gasoline prices, wage rates for drivers increase cost for the firm. Describe the supply and demand shifts t..

  Why would you feel safer on a united air lines plane

Professional football teams sometimes charter airplanes to take them to their away games. Would you feel safer on a United Air Lines plane that had been chartered by the Washington Redskins than on a regularly scheduled United Air Lines flight

  What near monopoly was broken up by profound technological

What near monopoly was broken up by profound technological change in the industry rather than active government efforts using antitrust laws. American Cigar Company IBM& mainframe computers Verizon & phone service Microsoft and operating software.

  Jamaica is among the more successful caribbean islands that

jamaica is among the more successful caribbean islands that offer great economic development and business

  What is the firm inverse demand function

Assume you're the manager of Alpha Enterprises, a firm that holds the patent that makes it the exclusive manufacturer of bubble memory chips. Based on the estimates provided by the consultant

  What is the level of production price and total profit per

Where Q is weekly production and P is price, measured in cents per unit. The firm"s cost function is given by C = 60Q + 25,000.Assume that the firm maximizes profits.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd