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/3. If A innovates and B does not, A earns $30 in revenue while B earns $10. If A innovates and B does likewise, both firms earn $20 in revenue. If neither firm innovates, both earn $10. Under what condition will firm B have an incentive to adopt if firm A adopts the innovation?
A. C > 30
B. 10 > C > 0
C. 35 > C > 25
D. C < 30
Answer: D
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