Answer to Question #67988 in Microeconomics for Cairna

Question

Two firms, Alpha Vineyard and Beta Winery, produce and sell wine. The demand for
Alpha’s wine is given by the equation,
QA = 200 − PA + PB.
In this equation, the price of Alpha’s wine is PA per bottle, and the price of Beta’s wine is
PB per bottle. Alpha Vineyard has a marginal cost of MC A = $20 per bottle, and a fixed
cost of FC A = $6000. The demand for Beta’s wine is given by the equation,
QB = 9000 − 100PB + 40PA.

Are the bottles of wine produced by Alpha Vineyard and Beta Winery, homogeneous
products or heterogeneous products? Your answer must reference the two firms’
demand functions

Answer 1

If two firms, Alpha Vineyard and Beta Winery, produce and sell wine, then bottles of wine produced by Alpha wineyard and beta winery are homogeneous goods, since they are similar products competing on price from each other and according to the fact, that their quantity demanded equations consist of both prices PA and PB.