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Solarno Enterprises has just successfully patented a flying car. The patent allows Solarno to act as an ordinary monopolist in the flying car market. The
Solarno Enterprises has just successfully patented a flying car. The patent allows Solarno to act as an ordinary monopolist in the flying car market. The market demand curve for flying cars can be represented by Q = 400 - 2P, where Q is the quantity (flying cars/year) and P is the price ($/flying car). Solarno's marginal cost of production is constant and equals $50. Fixed costs are zero. Incidentally, the flying car patent only lasts for one year. a. (6 points) What is Solarno's profit-maximizing choice of price and quantity? Explain carefully, and include a graph. b. (6 points) Calculate the usual "dead-weight loss" associated with this monopoly. Is this amount actually a dead-weight loss within the Solarno patent example? Explain
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