Assume the demand per period for a new type of laptop computer for developing countries is known to be Q = 240 - 0.2 P, where P is price. The marginal cost of the laptop is $800. But assume now that the laptop market is a monopoly, and the monopolist is the only person capable of inventing and patenting the cost-reducing innovation.

(1) What is the initial equilibrium price and quantity of laptop? What is the consumer surplus? What is the monopoly profit? What is the deadweight loss of the monopoly?

A new assembly process is patented by an inventor. It reduces the cost of the laptop from $800 to $500.

(2) What is the price and quantity produced after the innovation? How much does price fall after the innovation? What is the deadweight loss of the patent? What is the profit? How much more profit does the monopolist make from the innovation?

(3) What is the net social gain from the innovation?