1.11 It costs $12 to produce a low-quality electric stapler and $16 to produce a high-quality stapler.

Consumers cannot distinguish good staplers from poor staplers when they make their purchases. Four firms produce staplers. Consumers value staplers at their cost of production and are risk neutral. Will any of the four firms be able to produce high-quality staplers without making losses? What happens if consumers are willing to pay $36 for high-quality staplers? (Hint: See Solved Problem 19.2.) A