There Are Two Existing Firms in the Market for Computer

question 119

Multiple Choice

There are two existing firms in the market for computer chips.Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not.Innovation incurs a fixed setup cost of C,while increasing the revenue.However,once the new technology is adopted,another firm,B,can adopt it with a smaller setup cost of C/2.If A innovates and B does not,A earns $20 in revenue while B earns $0.If A innovates and B does likewise,both firms earn $15 in revenue.If neither firm innovates,both earn $5.Under what condition will firm B have an incentive to adopt if firm A adopts the innovation?

• A) C > 30
• B) C < 30
• C) 10 > C > 0
• D) 35 > C > 25

---

Definitions:

Intron

Intervening sequence found between exons in mRNA; removed by RNA processing before translation.

Exon

Segment of mRNA containing the protein-coding portion of a gene that remains within the mRNA after splicing has occurred.

Adenine

One of the four nucleobase molecules in DNA and RNA, which pairs with thymine in DNA or uracil in RNA and is a fundamental component of genetic coding.

Thymine

A nitrogenous base found in DNA, pairing with adenine through hydrogen bonds.