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 A innovate?
A. C > 30
B. C < 30
C. 35 > C > 25
D. 10 > C > 0
Answer: D
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A natural monopoly
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A) lasting about six months. B) lasting about two years. C) in which all inputs are fixed. D) in which at least one input is fixed.
A Roth IRA differs from a traditional IRA in that
A. the Roth IRA allows for savings towards retirement. B. the Roth IRA is phased out at certain income levels. C. the Roth IRA is not tax deductible at the time it is deposited. D. all of these answer options are correct.