Suppose the marginal cost of contract provisions is MC = 2Q where Q is the quantity of contract provisions in given contract. The marginal benefit for a contract with a suppliers is MR = 60-Q. The buying firm does not want more than 25 provisions in the contract. What is the optimal number of contract provisions? a. none of the available options. b. 0 becuase the firm will vertically integrate. c. 20. d. 15.
Suppose the marginal cost of contract provisions is MC = 2Q where Q is the quantity of contract provisions in given contract. The marginal benefit for a contract with a suppliers is MR = 60-Q. The buying firm does not want more than 25 provisions in the contract. What is the optimal number of contract provisions? a. none of the available options. b. 0 becuase the firm will vertically integrate. c. 20. d. 15.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1) Suppose the marginal cost of contract provisions is MC = 2Q where Q is the quantity of contract provisions in given contract. The marginal benefit for a contract with a suppliers is MR = 60-Q. The buying firm does not want more than 25 provisions in the contract. What is the optimal number of contract provisions?
a. none of the available options.
b. 0 becuase the firm will vertically integrate.c. 20.
d. 15.
2.)
Reconsider the question above. If COVID 19 is causing increased uncertainty in the suppliers ability to provide what the buying firm wants, the MB of contracting increases to MB = 78-Q. The resulting number of provisions will now be
a.0 because the firm will vertically integrate.
b. 13.
c. 26d. none of the available options.
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2.)
Reconsider the question above. If COVID 19 is causing increased uncertainty in the suppliers ability to provide what the buying firm wants, the MB of contracting increases to MB = 78-Q. The resulting number of provisions will now be
a.0 because the firm will vertically integrate.
b. 13.
c. 26d. none of the available options.
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