Question
A monopolist (AT&T) is facing the following demand schedule P=24-3Q. That is,Q=0 implies P=24, thenQ=1 impliesP=21, andQ=2 impliesP=18, and so on.Fixed costs will be neglected
A monopolist (AT&T) is facing the following demand schedule P=24-3Q. That is,Q=0 implies P=24, thenQ=1 impliesP=21, andQ=2 impliesP=18, and so on.Fixed costs will be neglected in this analysis. The marginal cost is constant and equal to 6 for every unit produced. Determine:
(i) The quantity produced corresponding to the number of maximum profits.
(ii) Nash equilibrium price if a new competitor, Vodafone, enters the market with an MC =5
(iii) Nash equilibrium price if a new competitor, Vodafone, enters the market with an MC=7.
(iv)In your answer to part (i), what would happen if the government charges an entry fee =50 to this company.
(v)In your answer to part (i), what would happen if the government introduces a sales tax (i.e., a specific tax per unit sold) of $3.
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