During recent years, Micro Chips Corp. has enjoyed substantial economic profits derived from patents covering a...

During recent years, Micro Chips Corp. has enjoyed substantial economic profits derived from patents covering a widerange of inventions and innovations for microprocessors used in high-performance desktop computers. A recentintroduction, the Penultimate, has proven especially profitable. Market demand and marginal revenue relations forthe product are as follows:

P = $5500 - $0.005Q

MR = ∂TR/∂Q = $5500 - $0.01Q

Fixed costs are nil because research and development expenses have been fully amortized during previous periods. Average variable costs are constant at $4500 per unit.

Calculate the profit-maximizing price/output combination and economic profits if Micro Chips enjoys an effectivemonopoly because of patent protection.

Calculate the price/output combination and total economic profits that would result if competitors with the same costs offer clones that make the market perfectly competitive.

Expert Solution

Rahul Sunny answered 8 months ago

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