For this exercise s=1+the fourth digit of your student number. A research laboratory announces the discovery of a new refreshment. Immediately the public expresses a (linear) demand for the new product. There are two firms which have capacity to produce quantities 91, 92 of the new product with constant marginal costs c₁, c2 respectively, where c2 = C₁ + 4 x s. You observe that before firms start to produce (i.e., q1 = 92 = 0) the market clears at p 160 × s. When supplies arrive at the market you observe that the equilib- rium price and quantity settle at p = 60 × s and Q = 200 × s respectively. = (i) Suppose that you consider investing in firm 1 by financing half of its production cost in exchange for half of its venue. Compute the profit that firm 1 would retain after paying you off. (ii) Alternatively you consider investing in this market and discover that, at a fixed cost F 70000, you can buy a technology to produce the new product with constant marginal costs c = 60. Explain and justify whether or not you would invest in this market. = (iii) Explain whether or not the manager of firm 1 would rather accept your offer in (i), or decline it and let you proceed with your alternative in (ii).
