You are the CEO of Comchip, a firm that sells specialized computers. Each of the firm's computers contain a unique chip that is produced at Comchip's west coast plant at a cost of C_w (Q_c) = Q_c². Once produced, the chips are shipped exclusively to the firm's east coast plant. There, the computers are assembled, boxed, and shipped to the market at a cost of C_e (Q) = 200Q. An economic consultant recently estimated the demand for Comchip's computers and found it to be P= 5,000 - Q.

a. Determine Comchip's optimal output and price for computers.

b. Explain how Compchip can induce plant managers to produce the required number of chips and computers.

(Note:  W = west coast plant; E = east coast plant; Q_C = output of West Coast plant; and Q = output of East Coast plant.)

Posted Date: 2/21/2013 1:26:38 AM | Location : United States

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