You are the manager of a firm that competes against

You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your product is better than the competition, the government purchasing agent views the products as identical and purchases from the firm offering the best price. Total government demand is Q = 750 – 8P and all five firms produce at a constant marginal cost of $50. For security reasons, the government has imposed restrictions that permit a maximum of five firms to compete in this market; thus entry by new firms is prohibited. A member of Congress is concerned because no restrictions have been placed on the price that the government pays for this product. In response, she has proposed legislation that would award each existing firm 20 percent of a contract for 270 units at a contracted price of $60 per unit. Would you support or oppose this legislation? Explain.


  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available



Get help from Economics Tutors
Ask questions directly from Qualified Online Economics Tutors .
Best for online homework assistance.