Consider the market for component in industrial machines

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Consider the market for a component in industrial machines that we will call "mechanical joints." Mechanical joints come in two types, "perfect" joints, which never break, and "defective" joints, which always break. A broken defective joint can be fixed, but it costs $1000 . (A repaired defective joint becomes a perfect joint.) There two types of firms, high quality and low quality. A high quality firm produces only perfect joints, while a low quality firm produces only defective joints. The unit cost of producing a joint is $1400 for high quality and $700 for low quality firms. There are 80 firms in total, 40 of the firms are low quality and 40 of the firms are high quality. Each firm has a capacity of 100 mechanical joints.

Reference no: EM133599666

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