Question 3: Assume that there are two inputs that a car producer uses: 1 engine and 4 tires. 1 car is produced using 1 engine and 4 tires as inputs. Supplier 1 is producing the engines and Supplier 2 is producing the tires. Price of 1 engine is v, and price of 1 tire is v2. The demand for the final product (car) is P = 200 – Q. Assume that costs of input producers (engine and tire producers) are zero. Also, the only costs of the car producer are engine and tires. Other costs of the car producer are assumed to be zero.
Question 3: Assume that there are two inputs that a car producer uses: 1 engine and 4 tires. 1 car is produced using 1 engine and 4 tires as inputs. Supplier 1 is producing the engines and Supplier 2 is producing the tires. Price of 1 engine is v, and price of 1 tire is v2. The demand for the final product (car) is P = 200 – Q. Assume that costs of input producers (engine and tire producers) are zero. Also, the only costs of the car producer are engine and tires. Other costs of the car producer are assumed to be zero.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Question 3: Assume that there are two inputs that a car producer uses: 1 engine and
4 tires. 1 car is produced using 1 engine and 4 tires as inputs. Supplier 1 is producing
the engines and Supplier 2 is producing the tires. Price of 1 engine is v, and price
of 1 tire is v2. The demand for the final product (car) is P = 200 – Q. Assume that
costs of input producers (engine and tire producers) are zero. Also, the only costs of
the car producer are engine and tires. Other costs of the car producer are assumed to
be zero.
a) Calculate the price, quantity and profits of the suppliers and car producer.
Show your calculations clearly
b), Assume that the car producer and engine producer decided to merge. What
type of merger is this? Will this merger be beneficial for the firms? Discuss
using words. DO NOT draw graphs. DO NOT do any calculations.
c) Can there be any negative effects of this merger to the economy? What are
they? Describe using words. DO NOT draw graphs. DO NOT do any
calculations. (7
OTM
C](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c0f8925-c585-4eef-aa4b-5935db7a54bd%2F18827bde-d60f-4ebd-8b03-befa0adbb3e5%2Fa012z48_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 3: Assume that there are two inputs that a car producer uses: 1 engine and
4 tires. 1 car is produced using 1 engine and 4 tires as inputs. Supplier 1 is producing
the engines and Supplier 2 is producing the tires. Price of 1 engine is v, and price
of 1 tire is v2. The demand for the final product (car) is P = 200 – Q. Assume that
costs of input producers (engine and tire producers) are zero. Also, the only costs of
the car producer are engine and tires. Other costs of the car producer are assumed to
be zero.
a) Calculate the price, quantity and profits of the suppliers and car producer.
Show your calculations clearly
b), Assume that the car producer and engine producer decided to merge. What
type of merger is this? Will this merger be beneficial for the firms? Discuss
using words. DO NOT draw graphs. DO NOT do any calculations.
c) Can there be any negative effects of this merger to the economy? What are
they? Describe using words. DO NOT draw graphs. DO NOT do any
calculations. (7
OTM
C
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