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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 Cw (Qc) = Qc2. 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 Ce (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; QC = output of West Coast plant; and Q = output of East Coast plant.)
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