Define fixed and variable costs, provide an example for both types in the production of a new gadget. 2. What is the total cost (TC) of this production process in terms of the fixed cost (FC), the variable cost (VC) and the number of gadget (g)? 3. Compute the Average Cost for each gadget. 4. What is the price of each gadget under perfect competition? 5. Under this price, will there be incentive to innovate? (Make sure to reference #4 and #5 in your answer.) 6. Assume we are in a monopoly. What is the total revenue in terms of the price of each gadget (Pg) and the number of gadgets (g) 7. Compute the marginal revenue. 8. Monopolies set Marginal Revenue (MR) = Marginal Cost (MC). Find an expression of the Price/MC ratio, given that elasticity of demand is &' &( ( '. Write ( )* in function of . 9. The monopolist sets the price when approaches -1. Show that this will provide economic incentive for innovation. What are the drawbacks of such a system? 10. What are other reasons one could have to innovate? Also, would it be possible to create imperfect competition