There Are Two Existing Firms in the Market for Computer

question 128

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. If C = 15, which is the perfect equilibrium of the game?

• A) A innovates, B does not.
• B) A innovates, B innovates.
• C) Neither firm innovates.
• D) None of the answers is correct.

---

Definitions:

Ideological Analysis

The study of media to uncover the underlying political or social beliefs influencing the content.

Media Representations

The portrayal or depiction of specific entities, identities, or issues within various media outlets and formats.

Reality

The state of things as they actually exist, as opposed to an idealistic or notional idea of them.

Economy Perspectives

Different viewpoints or analyses regarding how economies operate, grow, and are structured.