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You run a startup working on solar-energy drones, and you consider whether to enter the market as a monopoly. Your marginal cost is MC =
You run a startup working on solar-energy drones, and you consider whether to enter the market as a monopoly. Your marginal cost is MC = 40. Based on your own knowledge, the demand curve can be either P = 120 Q or P = 200 Q, with 50-50 chance. You will learn the exact demand curve only if you incur a xed cost of 5; 000 to run the business. Alternatively, you can stay out of the market and earn zero pro t. (a)(3 pts) What are your net pro ts when P = 120Q and when P = 200Q (don't forget to the xed cost)? Should you enter the market? (b)(3 pts) If a consultant can tell you exactly which demand curve will realize, how much would you pay them at most? For
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