Woz Enterprises specializes in electrical components. The market for one particular component is perfectly competitive and in long-run equilibrium. Marginal cost is constant at 30. Woz can develop a much cheaper process for producing this component, lowering its marginal cost to 10. The R&D cost of developing the new process would be F, and Woz would be able to obtain a patent for it and become a monopoly supplier of this component. Demand for the product over the relevant period is given by p = 50 – 2Q. Show the R&D investment would be worthwhile (raise profit) for Woz if F = 150 but not if F = 250. What is the critical value for F that determines whether R& D is worthwhile for Woz?
Answer to relevant QuestionsAssume that both the U. S. and Canadian demand curves for lumber are linear. The Canadian demand curve lies inside the U. S. curve (the Canadian demand curve hits the axes at a lower price and a lower quantity than the U. S. ...In Question 6.1 assume that the R& D cost is 150. Are consumers made better off by the action taken by Woz? Does total surplus rise?Trade between North and South Korea was legalized in 1988, but is currently very limited. Assume, however, that Hyundai has 200 workers in a plant in North Korea just across the boundary with South Korea, where a ...How would the shape of the total supply curve in Q & A 17.1 change if the U.S. domestic supply curve hit the vertical axis at a price above p?As a result of the North American Free Trade Agreement, many iconic “American” cars are not assembled in the United States. Explain why. Provide some examples of U.S. cars that are assembled outside of the United States.
Post your question