In a monopoly market, you have an inverse demand function P=a-bQ, where Q is total market production and a and b are positive constants. Assume marginal costs of production are a positive constant c. Obtain the marginal revenue of this firm. Explain why it is different from that of a perfectly competitive firm. Calculate the lump sum tax which would induce this monopoly firm to exit the market. Calculate the incentive this monopoly would have to invest in a process innovation.Assume this monopoly has found a way to divide their consumer base into two identifiable groups. Discuss the impact this would have on the prices consumers pay.

Monopoly Market: A monopoly market refers to a market structure in which a single firm has exclusive…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In a monopoly market, you have an inverse demand function P=a-bQ, where Q is total market production and a and b are positive constants. Assume marginal costs of production are a positive constant c.

Obtain the marginal revenue of this firm. Explain why it is different from that of a perfectly competitive firm.
Calculate the lump sum tax which would induce this monopoly firm to exit the market.
Calculate the incentive this monopoly would have to invest in a process innovation.
Assume this monopoly has found a way to divide their consumer base into two identifiable groups. Discuss the impact this would have on the prices consumers pay.

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