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

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Definitions:

Ultraviolet Rays

A form of electromagnetic radiation with a wavelength shorter than that of visible light but longer than X-rays, capable of producing sunburn and contributing to skin cancer.

Nervous System

An extensive network of specialized cells that coordinates actions and sensory information by transmitting signals to and from different parts of the body.

Bone Density

The measurement of the quantity of mineral matter per square centimeter of bones, important for diagnosing osteoporosis.

Bone Density

The quantity of mineral matter per square centimeter of bones, important for diagnosing osteoporosis and assessing fracture risk.