the set of Fationalizable strategies will be the same for party R.) Explain your reasoning. ve Intel and AMD, the primary producers of computer central processing units (CPUS), compete with one another in the mid-range chip category (among other categories). Assume that global demand for mid-range chips depends on the quantity that the two firms make, so that the price (in dollars) for mid-range chips is given by P = 210 – Q, where Q = qin- || GAMD and where the quantities are measured in millions. Each mid- + 9AMD tel range chip costs Intel $60 to produce. AMD's production process is more streamlined; each chip costs them only $48 to produce. (a) Write the profit function for each firm in terms of qintel and qAMD- Find each firm's best-response rule. (b) Find the Nash equilibrium price, quantity, and profit for each firm. (c) (Optional) Suppose Intel acquires AMD, so that it now has two sep- arate divisions with two different production costs. The merged firm wishes to maximize total profits from the two divisions. How many chips should each division produce? (Hint: You may need to think carefully about this problem, rather than blindly applying mathe- matical techniques.) What is the market price and the total profit to the firm? lu game of Exercise S9. In reality, the three coun-
the set of Fationalizable strategies will be the same for party R.) Explain your reasoning. ve Intel and AMD, the primary producers of computer central processing units (CPUS), compete with one another in the mid-range chip category (among other categories). Assume that global demand for mid-range chips depends on the quantity that the two firms make, so that the price (in dollars) for mid-range chips is given by P = 210 – Q, where Q = qin- || GAMD and where the quantities are measured in millions. Each mid- + 9AMD tel range chip costs Intel $60 to produce. AMD's production process is more streamlined; each chip costs them only $48 to produce. (a) Write the profit function for each firm in terms of qintel and qAMD- Find each firm's best-response rule. (b) Find the Nash equilibrium price, quantity, and profit for each firm. (c) (Optional) Suppose Intel acquires AMD, so that it now has two sep- arate divisions with two different production costs. The merged firm wishes to maximize total profits from the two divisions. How many chips should each division produce? (Hint: You may need to think carefully about this problem, rather than blindly applying mathe- matical techniques.) What is the market price and the total profit to the firm? lu game of Exercise S9. In reality, the three coun-
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
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Transcribed Image Text:the set of Fationalizable strategies will be the same for party R.) Explain
your reasoning.
ve Intel and AMD, the primary producers of computer central processing
units (CPUS), compete with one another in the mid-range chip category
(among other categories). Assume that global demand for mid-range
chips depends on the quantity that the two firms make, so that the price
(in dollars) for mid-range chips is given by P = 210 – Q, where Q = qin-
||
GAMD and where the quantities are measured in millions. Each mid-
+ 9AMD
tel
range chip costs Intel $60 to produce. AMD's production process is more
streamlined; each chip costs them only $48 to produce.
(a) Write the profit function for each firm in terms of qintel and qAMD-
Find each firm's best-response rule.
(b) Find the Nash equilibrium price, quantity, and profit for each firm.
(c) (Optional) Suppose Intel acquires AMD, so that it now has two sep-
arate divisions with two different production costs. The merged firm
wishes to maximize total profits from the two divisions. How many
chips should each division produce? (Hint: You may need to think
carefully about this problem, rather than blindly applying mathe-
matical techniques.) What is the market price and the total profit to
the firm?
lu game of Exercise S9. In reality, the three coun-
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