A monopolist produces output with the following (inverse) demand function: P=120-Q where P is the market price and Q is the market demand of a number of firms. The marginal cost of each firm is constant and the same (water and labor resources come from the same source) of 60. From these market conditions, calculate the change in company profits and social gains due to a decrease in marginal costs so that they become 35 after innovation.

A monopolist produces output with the following (inverse) demand function: P=120-Q where P is the market price and Q is the market demand of a number of firms. The marginal cost of each firm is constant and the same (water and labor resources come from the same source) of 60. From these market conditions, calculate the change in company profits and social gains due to a decrease in marginal costs so that they become 35 after innovation.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 14E

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