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Practice+Final+2 - FirmsandMarkets Quiz PracticeFinalExam ....

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Firms and Markets Quiz Practice Final Exam Please answer in the space provided. You must answer questions 1 and 2 and one of Questions 3 and 4 You may consult one page of notes and a calculator. YOU MUST ANSWER THIS QUESTION (1) 3D Karaoke [25 points] 3D Karaoke (3DK) is getting hot in Manhattan. For those who are new to the experience, 3D Karaoke comes with special 3D glasses that give you the image of an enthusiastic audience that screams and shouts as you sing along. You can choose your preferred audience. There is currently one 3DK bar in the Village, but two new companies have announced plans for creating their own bars: K‐R‐Us and the company you work for, BAStar. The company that owns the technology has given one‐bar licenses to these two entrants with the assurance that they will be the only two licenses issued in Manhattan for years to come. The two entrants are currently trying to determine their best locations, which they have each narrowed to the Village and Midtown. If both bars are located in the Village, then each will receive a net profit of $10m. If both bars located in midtown then BAStar gets $19m and K‐R‐Us $21m. If BAStar locates in the Village and K‐R‐Us in Midtown, then BAStar gets $22m and K‐R‐Us $9m. Finally, if BAStar locates in Midtown and K‐R‐Us in the Village then BAStar gets $9m and K‐R‐Us $18m.
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