Consider an industry with two products A and B. There are 100 consumers who value product A at vA = 120 and product B at vB = 28 The incumbent firm 1 produces both goods. Its marginal cost of production for good A is cA = 80 and cB1 = 150 for good B. Suppose the incumbent firm 1 offers the two products as a bundle at a price p1. There is also a potential new entrant firm 2 who only produces good B at a marginal cost of cB2 = 80. Firm 2 charges a price p2 for g The firms compete in prices for the conusmers. Which one of the statements below is correct? Firm 1 serves all consumers charging a price p1 = 170. Firm 2 serves all consumers charging a price p2 = 110. O Firm 2 serves all consumers charging a price p2 = 60. Firm 1 serves all consumers charging a price p1 = 30. None of the above.

Consider an industry with two products A and B. There are 100 consumers who value product A at vA = 120 and product B at vB = 28 The incumbent firm 1 produces both goods. Its marginal cost of production for good A is cA = 80 and cB1 = 150 for good B. Suppose the incumbent firm 1 offers the two products as a bundle at a price p1. There is also a potential new entrant firm 2 who only produces good B at a marginal cost of cB2 = 80. Firm 2 charges a price p2 for g The firms compete in prices for the conusmers. Which one of the statements below is correct? Firm 1 serves all consumers charging a price p1 = 170. Firm 2 serves all consumers charging a price p2 = 110. O Firm 2 serves all consumers charging a price p2 = 60. Firm 1 serves all consumers charging a price p1 = 30. None of the above.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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