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1. Suppose the demand curve for widgets is given by p=100q where p is the price, and q is the quantity. a) If the market
1. Suppose the demand curve for widgets is given by p=100q where p is the price, and q is the quantity. a) If the market is served by a single monopolist with constant marginal cost of mc1=$80, what is its incentive (or additional profit) from developing a cost-saving process innovation that reduces marginal cost to mc2=$20 ? b) If the market is competitive, and firms sell widgets at a price equal to constant marginal cost mc1=$80, what is an individual firm's incentive to develop the same cost-saving process innovation (for which it obtains a patent to exclude other firms) that reduces marginal cost to mc2=$20? c) Under which market structure does a firm have a larger incentive to innovate? By how much
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