3. Monopoly: The following demand and MC can be used to describe a pure monopoly: Q...

3. Monopoly:

The following demand and MC can be used to describe a pure monopoly:

Q = 14 - P MC = AC = 2

(Note these equations will be used again in an oligopoly question)

A. Find the monopoly equilibrium (profit).

B. Explain how a monopoly can maintain its barriers?

C. Assume a new firm sees a way to enter but has higher costs (MC =AC =4). How could the monopoly use Limit Pricing to keep the firm out? Be specific with regard to price, and show what happens to the monopoly’s profit at your limit price. (It specific.)

Expert Solution

The answers are given below :

Rahul Sunny answered 2 years ago

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