Find the price and quantity combination of the profits, economic business off for the effective monopolies.
During recent years, MBI, Inc) has enjoyed substantial economic profits derived from patents covering a wide range of inventions and innovations. A recent software product, Quicker Better ®, has proven especially profitable) Market demand and marginal revenues for this
software product are:
P = $5,500 - $0.05*Q
MR = $5,500 - $0.10*Q
Where P is the product price, its quantity sold is Q and MR is the marginal revenue of the product. Fixed costs are zero since the research and development expenses have been fully amortized in previous periods. Average variable costs are constant at $4,500 per unit.
1. Compute the price/output combination and the total economic profits which would result if competitors offer clones which make the Quicker Better market competitive)
2. Illustrate what are the economic business offs of allowing patent protection and effective monopolies from a societal perspective? Explain.