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Microeconomics

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Monopoly: In the Dolphin Tank

MICRO-EKVMUG

You are an investor on a popular investment TV show deciding between investing in Product A or Product B, both of which are brand new inventions which cannot be patented.

Your goal is to maximize the profit you make on each item you sell. You are not very concerned about fixed costs, as you can afford to pay those.

The factory for product A will be easy to set up, while the factory for product B requires high startup costs and will take a while to get running. After the factories are set up, both products would be equally popular (i.e. face the same demand curve) and would have similar marginal costs.

Which product should you invest in?

A

You should invest in product A.

B

You should invest in product B.

C

It does not matter which you invest in, they will give you the same profit.

D

There's not enough information to be able to tell.