1.Consider a monopolist facing an inverse demand curve of P=90Q.Suppose the firm has zero marginal costs but has a fixed cost of F=$1,000 that must be paid before it can enter the market and begin production.

(a)Derive the profit maximizing output and price. (10)

(b)Derive the firm's profit, including its entry cost. (5)

(c)Now suppose the market is served by two firms.Assuming that both enter, derive the Cournot equilibrium quantities and the market price. (10)

(d)Assuming that each firm has to pay the fixed cost F before entering the market, calculate their profits. (5)

If one firm is already in the market acting as a monopolist, would a second firm find it profitable to pay F and enter, assuming that they then would play a Cournot game? (5)