Assume the market demand for the latest electonic reading device is estimated to be P=60-2Q and a computer company is the sole supplier of the decives and does not practice price discrimination. The company's marginal cost is 2Q.
a Illustrate the market demand, marginal revenue and the company's marginal cost curve on a diagram. Include the values of the intercepts of each axis for each curve.
b Show on your diagram and calculate the profit maximising output and price.
c Calculate the consumer surplus at the profit maximising price and quantity.
d Could the company increase profit by practicing a form of price discrimination? Explain.
e How may the company protect its monopoly power?