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Considers a monopolist with the following demand curve: P=1000-10Q. The monopolist faces MC=AC=100

a. Solve for the profit-maximizing level of monopoly output, price, and profits.

b. Suppose a potential entrant is considering entering, but the monopolist has a cost advantage. The potential entrant faces costs MC=AC=150. Assuming the monopolist continues to profit-maximize, solve the residual demand curve for the entrant.

c. Assume the potential entrant follows the Cournot assumption about the monopolist’s output. Solve for the potential entrant’s output, price, and profits in this scenario. What are the new monopoly profits?

d. Is there a price the monopolist could charge to deter entry? Solve for the limit price and output that will completely deter entry. What is monopoly profit at this point?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91709955

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