Imagine there are two companies. East Wafer and West Wafer, which produce silicon wafers, the base component in the microchips which constitute the brains of our computers. Below is the daily demand for silicon wafers: Quantity Total (of wafers) Price Revenue 0 $120 $0 $27,500 250 $110 500 $100 $50,000 750 $90 $67,500 1000 $80 $80,000 1250 $70 $87.500 1500 $60 $90,000 1750 $50 $87.500 2000 $40 $80,000 2250 $30 $67,500 2500 $20 $50,000 2750 $10 $27,500 3000 $0 SO Suppose, for simplicity, East Wafer and West Wafer have the same constant cost structure, so maximizing total revenue maximizes profit. If East Wafer and West Wafer initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium? O East Wafer and West Wafer will each earn a daily profit of $40000. O East Wafer will eam a daily profit of $50000 and West Wafer will earn a daily profit of $37500. O West Wafer will earn a daily profit of $50000 and East Wafer will earn a daily profit of $37500. O East Wafer and West Wafer will each earn a daily profit of $45000.

Imagine there are two companies. East Wafer and West Wafer, which produce silicon wafers, the base component in the microchips which constitute the brains of our computers. Below is the daily demand for silicon wafers: Quantity Total (of wafers) Price Revenue 0 $120 $0 $27,500 250 $110 500 $100 $50,000 750 $90 $67,500 1000 $80 $80,000 1250 $70 $87.500 1500 $60 $90,000 1750 $50 $87.500 2000 $40 $80,000 2250 $30 $67,500 2500 $20 $50,000 2750 $10 $27,500 3000 $0 SO Suppose, for simplicity, East Wafer and West Wafer have the same constant cost structure, so maximizing total revenue maximizes profit. If East Wafer and West Wafer initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium? O East Wafer and West Wafer will each earn a daily profit of $40000. O East Wafer will eam a daily profit of $50000 and West Wafer will earn a daily profit of $37500. O West Wafer will earn a daily profit of $50000 and East Wafer will earn a daily profit of $37500. O East Wafer and West Wafer will each earn a daily profit of $45000.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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