Part A. (20 minutes) " veryone must answer all parts of this question: You have a monopoly over the production and sale I "Oumpahor s " a patented new inst ume. t or bands and orchestras. Your ma keting xperts have estimated that the annual "gridw. de demand for Compahorns is as follow s: Q = 1 020,OU0 - 1,000 P "where Q is the quantity of Oompahorns. and . is the price of an Compahorn in dollars. Your production engineers have estimated that the produ tion of Compahorns will require initial set-up costs of $30 millio.. and marginal costs of production of $10v per Oompahurn. 1 Based on this information, what price should you charg- and what quantity should you produce and sent Explain how you arrived at your answers , or show your work) What is the elasticity of demand at this price and qua..tity? Explain. 3. The City of New York, always desperate for tax revenue and realizing that the Bronx is the on'y realistic place that Oompahor s can be manufactured, decides to place a special annual tax of $20 million on your operations. Tow will this affect your price and quantity decisions? Explain 4. Since your predicted sales are worldwide, is there additional demand information that would ' e of interest to your Why (or why not)? Part B. (20 minutes) Answer two (2) of the following. Indicate whether you agree or disagree. Explain your answer. 1. If the Jeneral cotors Corp. were to merge with the U.S. Steel Corp., any _fficiencies that would be achieved by the merged company as a consequence of the mur_er would be due primarily to economies of scale. 2. If a seller practices price discrimination, then it will tend to charge the highest price to the market segment with the most elastic demand. 3. A buyer that has monopsony power will gain the most benefit from its power when the supply curve of the s.llers (from which it is buying) is perfectly elastic