Deciding on Capacity You are a division manager for Wayne Biotech, and are tasked with deciding...

 

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Deciding on Capacity You are a division manager for Wayne Biotech, and are tasked with deciding on the capacity of your new factory for a new ecologically friendly weed killer. A similar new product has been developed by Isley Industries. The demand for the new weed killer is given Q. 48-2p, where p is the price, Q=qw+91, and aw and q, are the quantity produced by Wayne and Isley, respectively. Wayne's cost of production per unit is 4; Isley's cost of production per unit is 2. Wayne and Isley will simultaneously decide on the capacity of their production facility, i.e., each will simultaneously decide on quantity. What quantity will you produce? What quantity do you expect Isley to produce? What are your expected profits? (20 points) b) You have the ability to accelerate the building of your production facility, but doing so will increase the total cost of the facility by 7. If you do so, Isley will observe your capacity before choosing the capacity of their plant. What quantity will you choose if you accelerate the building of your plant? Is accelerating the building of your production facility worthwhile? Why or why not? (20 points) Deciding on Capacity You are a division manager for Wayne Biotech, and are tasked with deciding on the capacity of your new factory for a new ecologically friendly weed killer. A similar new product has been developed by Isley Industries. The demand for the new weed killer is given Q. 48-2p, where p is the price, Q=qw+91, and aw and q, are the quantity produced by Wayne and Isley, respectively. Wayne's cost of production per unit is 4; Isley's cost of production per unit is 2. Wayne and Isley will simultaneously decide on the capacity of their production facility, i.e., each will simultaneously decide on quantity. What quantity will you produce? What quantity do you expect Isley to produce? What are your expected profits? (20 points) b) You have the ability to accelerate the building of your production facility, but doing so will increase the total cost of the facility by 7. If you do so, Isley will observe your capacity before choosing the capacity of their plant. What quantity will you choose if you accelerate the building of your plant? Is accelerating the building of your production facility worthwhile? Why or why not? (20 points)