A monopolist faces an inverse demand function P = 10 - Q in each of two periods A and B. Her marginal costs are 5 in period A and 5 - q A in period B (both in dollars). Thus, the monopolist "learns" about production in period A so that her marginal costs are reduced in period B. Assume that there is no discounting of second-period income.

(a) Derive the monopolist's profit maximizing quantities in both periods Suppose that in period B the monopolist (incumbent) faces an entrant with unit costs of $5. The entrant also has a fixed cost of F = 1/9 in order to enter the industry.

(b) Suppose the incumbent decides to deter entry in period B, what would be her output in period A? (c) Based on your calculations from part (i), should the incumbent deter entry? THis is COMPLETEE.