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Question: upcards a profitmaximizing firm has decided to introduce a...

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. UP-Cards, a profit-maximizing firm, has decided to introduce a new high-capacity memory card for digital cameras. UP-Cards has the choice of two production technologies. Technology A is publicly available and will result in annual costs of CA(q) 412q. Technology B is a proprietary technology developed in UP-Cards research labs. It involves higher fixed costs but lower marginal costs: B258 UP-Cards must decide which technology to adopt. Market demand for the memory cards is given by where Q is total industry output (measured in 1,000,000 units), and P is the price that retailers pay for each memory cardNote: For your calculations, carry 2 non-zero digits to the right of the decimal point. a) Suppose UP-Cards would maintain a monopoly position in the market for the entire product lifespan (i.e., one year) without threat of entry. Which technology should UP Cards adopt? (Hint: Base your recommendation on a profit-comparison.) (4 points) b) Suppose UP-Cards expects its archrival, REC-Tech, to enter the market shortly after UP-Cards introduced its new high-capacity memory cards. REC-Tech will have access only to technology A. If REC-Tech does enter the market, the two firms will compete in quantities, choosing their output simultaneously (i) If UP-Cards adopts technology A and REC-Tech enters the market, what will be the equilibrium profit of each firm? Would REC-Tech choose to enter the market? (4 points) (ii) If UP-Cards adopts technology B and REC-Tech enters the market, what will be the equilibrium profit of each firm? Again, would REC-Tech choose to enter the market? (4 points) (iii) Which technology would you advise UP-Cards to adopt given the threat of possible entry? Briefly explain. (2 points) cNow suppose that UP-Cards adopted technology A, and chooses its output before REC-Tech. What will be the equilibrium profit of each firm? (4 points)

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