Problem: Paradox Dental, Ltd., enjoys a local monopoly in the provision of oral examination services in Tuskegee, Alabama. Total and marginal revenue relations for the standard procedure are:
TR = $250Q - $0.001Q2
MR = dTR/dQ = $250 - $0.002Q
Marginal costs (and average variable costs for the process are stable at $150 per unit.
Fixed costs are zero.
Q1. As a monopoly, calculate Paradox Dental's output, price, and profits at the profit-maximizing activity level.
Q2. What price and profit levels would prevail based on the assumption that new entry into the local market results in competitive market pricing?