A monopolist faces a demand curve p=150-q. Currently MC=AC=50. The monopolist is able to develop a cost-saving device which will lower their cost to MC=AC=30. a) How much will profits increase after the introduction of the new technology? b) If it costs the monopolist $3000 to develop this technology would they? If not what would be their maximum they would pay to develop this technology? c) If this industry were perfectly competitive, with the same cost, how much could a patent holder earn for this technology?

A monopolist faces a demand curve p=150-q. Currently MC=AC=50. The monopolist is able to develop a cost-saving device which will lower their cost to MC=AC=30. a) How much will profits increase after the introduction of the new technology? b) If it costs the monopolist $3000 to develop this technology would they? If not what would be their maximum they would pay to develop this technology? c) If this industry were perfectly competitive, with the same cost, how much could a patent holder earn for this technology?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter23: Monopoly

Section: Chapter Questions

Problem 2QP

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