Setting price and produces an output

Assume that Babble-On’s patents for speech-translation software covering 314 languages lapsed, as well as entry of new competitors within this market eroded the demand for Babble-On software, but the firm retains several market powers since competitors’ products are not perfect substitutes. Assume that the new demand curve facing Babble-On is precisely its previous marginal revenue curve. Therefore babble-On would be expected to: (w) produce q₂ output since minimum average variable cost corresponds to point b. (x) set its price equal to P₂ and produce output q₁. (y) exit the industry because its maximum possible accounting profit is zero. (z) operate at a level of output which exceeds the efficient level for society as a entire.

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