Answer to Question #67988 in Microeconomics for Cairna

Question #67988
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
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Expert's answer
2017-05-04T08:42:09-0400
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.

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