b. Suppose you can develop an improved production process that lowers your marginal cost to MCr ,

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b. Suppose you can develop an improved production process that lowers your marginal cost to MCr , MC. Once developed, you will have a patent on this technology, implying that your competitor cannot adopt it. You would finance the fixed cost of this new technology with a payment plan that results in a recurring fixed cost FC for the life of the patent. If you do this, what do you think will happen to your output?

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