Question
You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses perspectives, the
You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing output firms operate under the assumption that the rival will hold constant. The inverse market demand for computes is P=5,900 Q, and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high powered computers and has fond a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your production and pricing plans? How will it impact Blackspots bottom line?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started