# C under which system are profits higher d under which

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c. Under which system are profits higher? d. Under which system is ride usage higher? 6. A transportation company hauls both coal and manufactured goods. Suppose that it faces a demand for hauling a ton of coal given by P c (Q c ) = 495 - 5Q c and therefore MR c = 495 - 10Q c and P m (Q m ) = 795 - 10Q m and therefore MR m = 795 - 20Q m for hauling a ton of manufactured goods. All abbreviations are as defined in class and subscripts represent variables associated with hauling coal (c) and manufactured goods (m). The firm’s marginal cost, regardless of which product is hauled, is equal to \$195 per ton and can be assumed to be constant with regard to the amount hauled. a. Determine the prices the firm should set for coal and manufactured goods in order to maximize profits. b. If the firm were required by its regulators to charge the same price to regardless of what is hauled, what impact would this have on firm profits? Why?
7. Suppose there are two firms, NEC and Intel. Suppose that Intel dominates in market share for computer memory chips and that NEC is considering entering this industry. The following payoffs represent the possibilities if NEC moves first, by deciding to enter the market or not to enter the market. Given NEC’s decision then Intel decides whether to respond by cutting prices and expanding output or ignoring NEC and therefore sharing the market. NEC DON’T ENTER ENTER I NTEL INTEL DON’T CUT PRICES CUT PRICES DON’T CUT PRCIES CUT PRICES NEC: \$10 M NEC: \$10 M NEC: \$13 M NEC: \$7 M INTEL: \$14 M INTEL: \$9 M INTEL: \$5 M INTEL: \$4 M a. Assuming this is a sequential move game with NEC moving first; circle the most likely moves and outcomes along the optimal path. b. Does NEC’s ability to move first give it an advantage? If so, how?