Assume a consumer whose demand curve is given by p = 10 – q.
There is an incumbent monopolist whose marginal cost is 2.
What are the monopoly price, monopoly profit, and consumer
surplus?
Now suppose that there is a potential entrant whose marginal
cost is zero. If there is entry, the incumbent firm and the entrant
compete in prices for the homogenous product. If entry, what would
be the market price and what would be consumer surplus?
Can the...