You are the manager of BlackSpot Computers, which competes directlyn with Conden

Question

You are the manager of BlackSpot Computers, which competes directlyn with Condensed COmputers to sell high-powered computers to businesses. From the two businesses perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P=5,100-.5Q and both firms produce at a marginal cost of $750 per computer. Currently, BlackSpot earns revenues of $6.38 million and profits (net of investment, R&D, and other fixed costs) of $1 million. The engineering department at BlackSpot has been stedily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high-powered computers and has found a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your production and pricing plans? How will it impact BlackSpot's bottom line?

Explanation / Answer

You are the manager of College Computers, a manufacturer of customized computers that meet the specifications required by the local university. Over 90 percent of your clientele consists of college students. College computer is not the only firm that builds computers to meet this university’s specifications; indeed, it competes with many manufactures online and through traditional retail outlets. To attract its large student clientele, College Computers runs a weekly as in the student paper advertising its “free service after the sale” policy in an attempt to differentiate itself from the competition. The weekly demand for computers produced by College Computers is given by Q=1,000-P, and its weekly cost of producing computers is C(Q) = 2,000 +Q^2. If other firms in the industry sell PCs at $600m what price and quantity of computers should you produce to maximize your firm’s profits? What long run adjustments should you anticipate? Explain.

similar queastion and answer pls rate

Well, marginal revenue equals 1,000-2q and marginal cost equals 2q

So MR=MC at 250 computers, so you ought to price them at 1,000-q= $750.

If the competition is at $600, you are probably going to see your demand curve move in and in the long run you are going to have to drop your price

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.