Question

Quiz: Chapter 13 Quiz This Question Reken Bebe 6of74 complete There are two firms Firm 1 is the humbent, which is current producing the manapoly output level Firm 2 is a potent entrant Fam1 would be to tereny however, it cannot commit to the monopoly output after only other words, Firments they each prodice the Court p oput and the Cournal duopoly prodt These quantityding firm face the inverse market demand of P130-0 where 0-9, +4, Each firm has a marginal cost of $55 per un Assume there are a fred costs Suppose the incumbent can pay a fee to the government for a dusive rights to the market What is the largest for the incumbent would be wing to pay to prevent entry? Assume it would pay a fee that would make more biti preventing and accommodalng entry The monopolist would pay a fee of up to to deter entry Enter your resp o nded to two decal places) Enter your answer in the answer box ch

Answer 1

The to Monopolist would $1781.25 to up. pay a fee of deter entry. We have Explanation Cormot Solution P= 130 - G front (Roofit -T) T = TR - TC (130-12, +22):91) – 55 Zz T, = 1309, -2,2-2, 4 - 559 DIT - 130-29, - q2 - 55=0 19 75 – 22 2 Fm-1 Best Similarly Respense a = 75 - 21 from 2 Best Response By Gelning q, and qr we get a I [ q, = 25 cond q = 25 I Fam-) (Incumbent pufig = (80 x 25) - (58x25 $ 6257

Now we compose, Cormor proht $695 with monopalet pretita Misnefody Solution MR = MC 130 - 2Q = 55 i Q = 375 . and P = 9.5 T= (92.5x37.5) - (55x37.5) F IT - $ 1406,257 Monopoly profit - Coumot Bootit Entry deter fee = $1406.25 - $625 = $781.25 L up to - Answer