McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 12,000 units of this part are as follows:

Direct materials $86,000
Direct labor 126,000
Variable factory overhead 58,000
Fixed factory overhead 138,000
Total costs $408,000

Of the fixed factory overhead costs, $55,000 is avoidable. Conners Company has offered to sell 12,000 units of the same part to McMurphy Corporation for $41 per unit.

Assuming there is no other use for the facilities, Schmidt should .

A) make the part, as this would save $14 per unit
B) make the part, as this would save $16 per unit
C) buy the part, as this would save the company $192,000
D) buy the part, as this would save $16 per unit

Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?