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Economics

12 You are manager of BlackSpot Computers, which competed directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses' prospective, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering the market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P = 5,100 - 5Q and both firms produce at a marginal cost of $750 per computer. Currently, Black Spot earns revenues of $6.38 million and profits (net investment, R&D, and other fixed cost) of $1 million. 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 found a process that allows it t manufacture each computer at a marginal cost of $500. How will impact BlackSpot's bottom line?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9271693

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