Calculate the monopoly profits and probability , Basic Statistics

Each firm in a competitive research industry can undertake one project at a constant cost, f = $960 to try and develop a certain new product. The inverse demand curve for the new product is expected to be p = 100 - 2Q, and its marginal cost of production is expected to equal $20 (with no fixed production costs).

2096_p.png

 The interest rate r is 5%. The probability ρ(n) that at least one of n firms will succeed is given by the following table:

Using these rounded figures rather than the values of the function they approximate, and using ρ (n+1) - ρ (n) as an approximation for ρ'(n), calculate,

(a) The socially optimal number of firms in an R&D race, n*.

(b) The number of firms that would race to develop the product if the winner were granted a permanent patent (monopoly profits forever). Does it make sense to grant such patents?

(c) Calculate the government prize, P that would induce the optimal amount of research.

 

 

Posted Date: 3/1/2013 5:04:05 AM | Location : United States







Related Discussions:- Calculate the monopoly profits and probability , Assignment Help, Ask Question on Calculate the monopoly profits and probability , Get Answer, Expert's Help, Calculate the monopoly profits and probability Discussions

Write discussion on Calculate the monopoly profits and probability
Your posts are moderated
Related Questions
what are the biomechanical techniques for swimming freestyle?

1. A search engine site claims that, on average, one out of five visitors clicks on an ad. (a) If 8 users visit the site, what is the probability that at least three click o

Problem: a. According to a Business week poll of 1035 adults, 40% of those surveyed agreed strongly with the proposition that business has too much power over American life (B

what are the methods of measuring mortality and fertility rates?

how do I answer: with the aid of a decision tree prepare a quantitative report advising the company on the optimal course of action. (use a time horizon of 6years and ignore the ti

Question: Students in a science class have just received their grades on the first test.  The instructor has provided information about the first test grades in some previous c

Each month, the firm Cashco has 50% chance that an amount of $ 1,000 will be credited In its current account, and a 50% chance that the account is debited $ 1,000. As current accou

A machine that fills quart milk cartons is set up to average 32.2 oz per carton, with a standard deviation of 1.2 oz. Assume a normal distribution for all of the cartons filled, wh

how can we construct a bivariate frequency distribution

Binding studies were carried out in which heparin was immobilized on the surface of cuvettes. The pH dependence of HPRG binding to heparin was investigated and the results are show