Suppose that Nokia has a monopoly in the market for 5g base stations. In order to...

Suppose that Nokia has a monopoly in the market for 5g base stations. In order to construct a network with Q base stations, it costs Nokia TC =8Q+50 and hence the marginal cost is MC=8.

(a) The demand for 5g base stations is Q=12−0.25P. Find the level of output that maximizes Nokia’s profits. What price is Nokia charging? What is the profit?

(b) What level of output would maximize total surplus in the 5g base station market? How much more surplus the market generates compared to the monopolistic market outcome?

(c) If the government provide Nokia a subsidy of S for every unit of 5g base station produced, which will decrease the marginal cost to MC=8-S, what quantity would Nokia choose as a function of S? How much more will Nokia produce when the subsidy S increases by one unit.

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Rahul Sunny answered 1 year ago

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