A patent monopolist faces a demand curve: P=10-1/3 Q and total cost F+2Q+2/3 Q^2 Now assume...

A patent monopolist faces a demand curve: P=10-1/3 Q and total cost F+2Q+2/3 Q^2

Now assume that the patent monopolist splits production between two factories, and that F is zero.

i. How much will each factory produce? What is the price? What is short run profit? What is the increase in short run profit from using 2 factories instead of one?

ii. Draw a graph to illustrate this case. Carefully indicate on the graph the total surplus generated, and the increase in consumer and producer surplus from using 2 factories.

Expert Solution

Rahul Sunny answered 2 years ago

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