Chap009.3 - Costs for Two Computer Game Producers (1) Costs...

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3 Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 13 Costs for Two Computer Game Producers (1) Nintendo Playstation Annual production 1,000,000 1,200,000 Fixed cost $200,000 $200,000 Variable cost $800,000 $960,000 Total cost $1,000,000 $1,160,000 Average total cost per game $1.00 $0.97 Observations Fixed costs are a relatively small share of total cost Cost/game is nearly the same Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 14 Costs for Two Computer Game Producers (2) Annual production 1,000,000 1,200,000 Fixed cost $10,000,000 $10,000,000 Variable cost $200,000 $240,000 Total cost $10,200,000 $10,240,000 Average total cost per game $10.20 $8.53 Nintendo Playstation Observations Fixed costs are a relatively large share of total cost Playstation has a $1.67 average cost advantage Playstation can lower prices, cover cost, and attract customers Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 15
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