How many internet hubs to produce to maximize firm profit

Assignment Help Business Economics

Reference no: EM131388432

You are the manager of GearNet and must decide how many internet hubs to produce to maximize your firm’s profit. GearNet and its only rival, NetWorks, sell dual-speed internet hubs that are identical from consumers’ perspective. The market price for hubs depends on the total quantity produced by the two firms. A survey reveals that the market price of hubs depends on total market output as follows: Total Quantity produced Price per unit 500 units $120 750 units $100 1000 units $90 Both firms have a similar structure of production and use labor, materials and machines to produce output. They hire labor and purchase materials on an as-needed basis. The machines they use were purchased three years ago, when they started the business. The accounting department of GearNet provides the following data for unit production costs, which are similar for NetWorks also: Item 250 units 500 units Labor $40 $40 Materials $30 $30 deprec. charge $80 $40 Technological constraints require each firm to produce either 250 hubs or 500 hubs. Identify the costs that are relevant for your decision, show the payoffs of the game in a normal form game, and then determine whether GearNet should produce 250 hubs or 500 hubs. Assuming that firms cannot cut down costs any further, is there any other way you can increase the profit of the firm?

Reference no: EM131388432

Questions Cloud

How are estimates and probabilities similar : Businesses use estimates in their budgets and financial statements. How are estimates different from probabilities? How are estimates and probabilities similar? Share an example of each.

What concept in the assigned readings do you find intriguing : What concept/idea in the assigned readings do you find most intriguing or useful? Why? How might you or others apply it?(The assigned reading of question 2 is "Hard Choices" by David Boies)

Firm produces plastic toys and plastic medical devices : A firm produces plastic toys and plastic medical devices. What happens to the supply of toys if the market price of medical devices increas. If demand for a product increases and supply of the product decreases at the same time,

Calculate average total cost : Calculate average total cost, what is the most efficient (minimum ATC) output quantity given the costs below? What should be the cost to produce 900 units?

How many internet hubs to produce to maximize firm profit : You are the manager of GearNet and must decide how many internet hubs to produce to maximize your firm’s profit. GearNet and its only rival, NetWorks, sell dual-speed internet hubs that are identical from consumers’ perspective. Assuming that firms c..

What is the most important entrepreneurial lesson to learn : What is the most important entrepreneurial lesson to learn from the business acumen of Steve Jobs? What is the most important lesson to learn from the personal relationship side of Steve Jobs?

What is the current dividend per share : You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

What is the current price : The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson-Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years?..

Determining the annual dividend rate : King's Farm has just issued preferred stock with a par value of $100 and an annual dividend rate of 8.09 percent. If your required rate of return is 8.56 percent, how much will you be willing to pay for one share of this preferred stock?

User Account

All Pages