= C2 Supreme Jet have been the only company taking tourists to the edge of space for the past few years. The market demand curve for flights is given by P = (40 3Q) where P is the price of a single seat and Q is the quantity of seats demanded. Supreme Jet have no fixed costs and constant marginal cost 4. Another company, Orbit Adventure , is considering entering the growing space tourism market and has newer more technologically advanced spaceships giving them a lower constant marginal cost of 2. However, a regular service requires some start up costs including a spaceflight permit from the government and access to government launch facilities, amounting to a fixed entry cost F. (a) Assuming that Supreme Jet is acting as a profit-maximising monopoly, determine the optimal price per seat Pm and number of seats sold Qm. (b) Now, assume that Orbit Adventure has no fixed cost for entry but that the incumbent Supreme Jet can lead by setting and announcing its profit-maximising capacity first before Orbit Adventure enters the market. What are the new equilbrium price of seats charged by both firms and the number of seats sold by each? How much profit does Supreme Jet make in this scenario? (C) If Is and 9. are the number of seats sold by Supreme Jet and Orbit Adventure, respectively, calculate the isoprofit line of all possible values of that would lead to the same profit for Supreme Jet as in part (b). Sketch this isoprofit curve on a graph of q. against qs along with a plot of the best response curve of Orbit Adventure (assuming zero fixed cost). (d) The govenment finally announces the decision to supply a permit and access to launch facilities to Orbit Adventure for the fixed price of F = 12. Orbit Adventure argues that this price is far too high to make the new venture worthwhile and will not lower prices and expand capacity for the space tourism consumer. Are they right? 98 and 90 = C2 Supreme Jet have been the only company taking tourists to the edge of space for the past few years. The market demand curve for flights is given by P = (40 3Q) where P is the price of a single seat and Q is the quantity of seats demanded. Supreme Jet have no fixed costs and constant marginal cost 4. Another company, Orbit Adventure , is considering entering the growing space tourism market and has newer more technologically advanced spaceships giving them a lower constant marginal cost of 2. However, a regular service requires some start up costs including a spaceflight permit from the government and access to government launch facilities, amounting to a fixed entry cost F. (a) Assuming that Supreme Jet is acting as a profit-maximising monopoly, determine the optimal price per seat Pm and number of seats sold Qm. (b) Now, assume that Orbit Adventure has no fixed cost for entry but that the incumbent Supreme Jet can lead by setting and announcing its profit-maximising capacity first before Orbit Adventure enters the market. What are the new equilbrium price of seats charged by both firms and the number of seats sold by each? How much profit does Supreme Jet make in this scenario? (C) If Is and 9. are the number of seats sold by Supreme Jet and Orbit Adventure, respectively, calculate the isoprofit line of all possible values of that would lead to the same profit for Supreme Jet as in part (b). Sketch this isoprofit curve on a graph of q. against qs along with a plot of the best response curve of Orbit Adventure (assuming zero fixed cost). (d) The govenment finally announces the decision to supply a permit and access to launch facilities to Orbit Adventure for the fixed price of F = 12. Orbit Adventure argues that this price is far too high to make the new venture worthwhile and will not lower prices and expand capacity for the space tourism consumer. Are they right? 98 and 90