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A faulty gasket on a piece of machinery supplied by Firm Z caused a fluid leak that
damaged equipment in Factory X. Determine the range of out-of-court settlements
when the expected value of litigation for the two firms is $65,000 in favor of Factory X.
The court costs for Firm Z are $20,000; the costs for Factory X are $25,000.
Regulatory authorities tend to be concerned about barriers to entry. Why are barriers so
important?
A firm is maximizing profit by producing goods X and Y, using resources A and B. The
firm is fully utilizing its supply of resource A, while a surplus of resource B is
available. The profit contributions from per units of goods X and Y are $5 and $4
respectively. The firm is considering expansion of its supply of resource A (at a cost of
$8 per unit). Increasing A by one unit would allow the firm to produce 3 additional units
of X, while producing 1 fewer units of Y. Should the firm expand its supply of A?
Explain.
When competing firms or nations collude to form a cartel, the intention is to set one
common price. This tendency to avoid competition should bring about stability.
Paradoxically, however, cartels are usually unstable. Why?
Determine the feasible region for the following linear programming problem:
Maximize Z = 10x + 8y
Subject to: 2x + 3y =< 11
5x + 2y =< 11; x, y >= 0
