Various industries suffer from an acute shortage of semiconductors (an essential component in electronic gadgets). Since the start of 2022, Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, increased chip prices by as much as 20%. United Microelectronics (UMC) has also issued a price increase of its own, raising quotes for 28nm and 22nm processes. A third semiconductor manufacturer based in China-Semiconductor Manufacturing International (SMIC) has joined TSMC and UMC in raising its prices for 28nm and 40nm processes. i. Consider the market for semiconductors is perfectly competitive. What will be the impact of an increase in prices for semiconductors on manufacturers' profits in the short and long-run? Explain your answer with reference to the law of supply." ii. Now consider that the semiconductors market is an oligopoly, where TSMC, UMC and SMIC control 90 per cent of the market share. Do you think the unanimous action of the three giant corporations is an act of collusion? Explain why the firms may prefer to collude rather than compete in an oligopolistic setup.

Various industries suffer from an acute shortage of semiconductors (an essential component in electronic gadgets). Since the start of 2022, Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, increased chip prices by as much as 20%. United Microelectronics (UMC) has also issued a price increase of its own, raising quotes for 28nm and 22nm processes. A third semiconductor manufacturer based in China-Semiconductor Manufacturing International (SMIC) has joined TSMC and UMC in raising its prices for 28nm and 40nm processes. i. Consider the market for semiconductors is perfectly competitive. What will be the impact of an increase in prices for semiconductors on manufacturers' profits in the short and long-run? Explain your answer with reference to the law of supply." ii. Now consider that the semiconductors market is an oligopoly, where TSMC, UMC and SMIC control 90 per cent of the market share. Do you think the unanimous action of the three giant corporations is an act of collusion? Explain why the firms may prefer to collude rather than compete in an oligopolistic setup.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 14E: Global Reach, Inc., is considering opening a new warehouse to serve the Southwest region. Darnell...

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