17. You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your product is better than the competition's, the government purchasing agent views the products as identical and purchases from the firm offering the best price. Total government demand is Q = 1,500 - 5P, and all five firms produce at a constant marginal cost of $120. For security reasons, the government has imposed restrictions that permit a maximum of five firms to compete in this market; thus, entry by new firms is prohibited. A member of Congress is concerned because no restrictions have been placed on the price that the government pays for this product. In response, she has proposed legislation that would award each existing firm 20 percent of a contract for 700 units at a contracted price of $160 per unit. Would you support or oppose this legislation? Explain. (LO2)
17. You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your product is better than the competition's, the government purchasing agent views the products as identical and purchases from the firm offering the best price. Total government demand is Q = 1,500 - 5P, and all five firms produce at a constant marginal cost of $120. For security reasons, the government has imposed restrictions that permit a maximum of five firms to compete in this market; thus, entry by new firms is prohibited. A member of Congress is concerned because no restrictions have been placed on the price that the government pays for this product. In response, she has proposed legislation that would award each existing firm 20 percent of a contract for 700 units at a contracted price of $160 per unit. Would you support or oppose this legislation? Explain. (LO2)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:17. You are the manager of a firm that competes against four other firms by bidding for
government contracts. While you believe your product is better than the competition's,
the government purchasing agent views the products as identical and purchases from the
firm offering the best price. Total government demand is Q = 1,500 - 5P, and all five
firms produce at a constant marginal cost of $120. For security reasons, the government
has imposed restrictions that permit a maximum of five firms to compete in this market;
thus, entry by new firms is prohibited. A member of Congress is concerned because no
restrictions have been placed on the price that the government pays for this product.
In response, she has proposed legislation that would award each existing firm 20 percent
of a contract for 700 units at a contracted price of $160 per unit. Would you support or
oppose this legislation? Explain. (LO2)
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