Firm A produces a product in high demand and it holds the sole legal authority to produce from patent protection. The demand function is Qd = 100,000 - P. The total cost function is C = 1,000,000,000 + $5,000Qs. Derived from C, the marginal cost of the firm is MC = $5,000.

a. What would be the equilibrium quantity and price if this were a perfectly competitive market? Demonstrate graphically the consumer surplus, producer surplus

b. Now assume there is one firm (Firm A) in this sector, calculate the optimal quantity and price. Calculate the producer surplus, consumer surplus, and deadweight loss. Demonstrate your findings in a graph.

c. Now assume that a new firm (Firm B) with a product that fits an identical purpose for consumers. This firm faces the same costs as Firm A. Show how to determine the new equilibrium quantities for both firms and equilibrium prices. Show your results graphically.

d. How many firms would be viable in this market? In other words, how many firms would remain in the market in the long run? Does the market quantity and price approximate the competitive outcome? Why or why not? If not, what is the deadweight loss and how does it compare to the monopoly case?

e. Now assume that due to 3D printing or expiration of patent, the fixed costs decrease by 75 percent for all firms and potential firms. How many firms are viable in this case? How does the deadweight loss compare to your findings in b and d?

f. What are some of the important managerial implications from this problem?