It costs kr. 1200 to produce a low-quality printer and kr. 1600 to produce a high-quality printer. Consumers cannot distinguish good printers from poor printers when they make their purchase. Four firms produce printers. Consumers value printers at their cost of production and are risk neutral.
a) Will any of the four firms be able to produce high quality printers without making losses?
b) What happens if consumers are willing to pay kr. 3600 for high-quality printers?