In a given market the inverse demand function is P = 170-Q per year. The interest rate is r = 0.05 and the cost structure of a firm is given by C(q) = 80 q. Now assume that originally there was a Cournot duopoly in the market (with equal costs) and that it would be too costly for the research institute to enter the market. Answer the following: If the research institute sells an exclusive license at a fixed annual fee L to firm 1 (with the threat of going to the other firm if firm 1 rejects the offer), then • The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 400 respectively. O The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 900 respectively. The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 900 respectively. O The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 400 respectively.

In a given market the inverse demand function is P = 170-Q per year. The interest rate is r = 0.05 and the cost structure of a firm is given by C(q) = 80 q. Now assume that originally there was a Cournot duopoly in the market (with equal costs) and that it would be too costly for the research institute to enter the market. Answer the following: If the research institute sells an exclusive license at a fixed annual fee L to firm 1 (with the threat of going to the other firm if firm 1 rejects the offer), then • The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 400 respectively. O The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 900 respectively. The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 900 respectively. O The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 400 respectively.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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