1. Suppose a monopoly firm faces the following demand and marginal revenue functions: p = 200 – 2Q and MR = 200 – 4Q. The monopoly has a constant marginal cost of $40 and a fixed operating cost of $1000. Answer the following questions:
a. Calculate the size of the consumer surplus in this market.
b. Calculate the size of the producer surplus in this market.
c. Calculate the size of the monopoly deadweight loss in this market.
d. Suppose the firm is considering investing in R&D that, if successful, has 10% chance of reducing marginal cost to $20 in the next time period (t = 1) and 40% chance of reducing marginal cost to $30 in the next time period (t = 1). If it fails, the firm’s marginal cost stays at $40 in the next time period. The fixed operating cost is assumed not to be affected by the R&D investment. The R&D spending is considered to be a one-time fixed and sunk investment. Find the maximum amount of R&D spending the firm is willing to commit given the probabilities of success and the results of the process innovation. Assume a discount rate of 10%.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more