You are a new entrant in a market with just one incumbent, who sells a roughly equivalent product. You initially take on the follower role
You are a new entrant in a market with just one incumbent, who sells a roughly equivalent product. You initially take on the follower role when it comes to choosing the amount of your product to manufacture. In researching your market, you've collected substantial data on prices and quantities, and asked your firm's analysts to determine as closely as possible the inverse demand curve for the market. They've reported back to you the following table. Price regressed on quantity: | | coefficients |Standard Error| t-Stat | P-value | Lower 95% 13693.75315 516.335387 26.52104329 | 4.68992E-79 12677.45369 14710.05261 Quantity 2.144549528 0.101248313 21.18108896 1.55351E-60 2.3438359 1.945263156 Instruction: Round all of your answers to the nearest hundredth. a. Report the estimated inverse demand curve for the market, and comment on whether it is precisely estimated. P=13693753| @ - | 2145 | @ x Q. Both estimated coefficients are statistically significant. | @ b. Suppose your marginal costs are $2,000 and the incumbent produces 4,000 units. What is the profit maximizing quantity you should produce? 9470.33| @ units c. Suppose your marginal costs are $2,000 and the incumbent's marginal costs are $1,500. What will be the market price if you and the incumbent produce at your respective profit maximizing levels? $[-662153| @
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