I have the answers to question 1 all parts but I need answers for all parts of question 2 and question 3 . Please help me with that.
ECON Homework 2. This monopolist has a patent which gives him the exclusive right to produce X. This patent can be Due: Saturday, 8:00 pm. sold to another producer, who would then have the exclusive rights to product X. Assume that the profit All questions are worth 5 points. that you calculated in question Ic can be earned each year, the patent protection lasts forever and the interest rate is 5%. There are a number of other producers of X who have the same production costs as Monopolies, Barriers to Entry and Open Market our monopolist, however in order to produce and sell product X they will have to purchase the patent from the current monopolist. If they do buy the patent, they will become the monopolist producing and Total Marginal Total Marginal | Average selling product X. Price Quantity labor Total Revenue Revenue cost Cost Cost At what price would the patent sell? 0 0 0 b. Suppose that someone, person B, purchases the patent at the price 40 1 40 5 determined in a. What will happen to this producers total cost per year? If it 2 78 9 changes, how much will it change? 38 3 114 12 37 4 C. 148 16 What will happen to B's average total cost? If it changes, how much will it change? 36 180 21 35 210 27 d. Draw this new average total cost curve in the monopoly graph you drew for la Label it. 34 7 238 35 Having just bought the patent, how many units of X will the new 33 284 45 Monopolist produce each year? 32 288 57 31 10 310 71 What price will the new monopolist charge per unit of X? 30 11 330 87 Given your answers to 26, e and f, how much profit will B earn each year? 20 12 348 105 28 13 384 125 3. There is often something that keeps potential competitors out of a profitable market. Very often, this "barrier" to entry is created by the government. In our example in question 2, 27 14 378 147 the barrier was a patent. Suppose that this patent only lasts 17 years and then it expires. After this, 26 15 390 171 anyone can enter the market and produce and sell product X. 25 16 400 197 a. Let us continue from question 2. The patent for X has just expired. There 24 17 408 225 are other potential producers of X who have the same production costs as our monopolist. 23 18 414 255 As these potential producers are attracted into the market by the profit, what happens to 22 19 418 287 the market price of X? b. At some point entry will stop. Describe the market conditions at this point. The table above shows the demand for product X facing a monopolist and his otal labor costs for each quantity produced each year. For now, assume that there are no other C . Assuming a large number of competitors have entered the market for X, such that it is costs. now a price takers market, what price would we expect for product X? Complete the table above and then draw a graph showing this producers average total cost, marginal cost, demand and marginal revenue
