Explore BrainMass
Share

Explore BrainMass

    MicroChips Corp has enjoyed substantial economic profits der

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    MicroChips Corp has enjoyed substantial economic profits derived from patients covering a wide range of inventions and innovations for microprocessors used in high performance desktop computers. A recent introduction, the Penultimate has proven especially profitable. Market demand and marginal revenue relations for the product are as follows:
    P=$5,500-$0.005Q
    MR=change TR/changeQ=$5,500-$0.01Q

    Fix cost are nil because research and development expenses have been fully amortized during previous periods. Average variable cost are constant at $4,500 per unit.
    A.Calculate the profit-maximizing price output combination and economic profits if Microchips enjoys an effective monopoly because of patent protection.
    B. Calculate the price-ouptut combination and total economic profits that would result if competitors offer clones that make the market perfectly competitive.

    © BrainMass Inc. brainmass.com October 10, 2019, 3:52 am ad1c9bdddf
    https://brainmass.com/economics/output-and-costs/439160

    Solution Preview

    A.Calculate the profit-maximizing price output combination and economic profits if Microchips enjoys an effective monopoly because of patent protection.

    MR = MC
    $5,500 - $0.01Q = $4,500
    0.01Q = 1,000
    Q = 100,000
    P ...

    Solution Summary

    MicroChips Corp has enjoyed substantial economic profits derived from patients covering a wide range of inventions and innovations for microprocessors used in high performance desktop computers. A recent introduction, the Penultimate has proven especially profitable. Market demand and marginal revenue relations for the product are as follows:
    P=$5,500-$0.005Q
    MR=change TR/changeQ=$5,500-$0.01Q

    Fix cost are nil because research and development expenses have been fully amortized during previous periods. Average variable cost are constant at $4,500 per unit.
    A.Calculate the profit-maximizing price output combination and economic profits if Microchips enjoys an effective monopoly because of patent protection.
    B. Calculate the price-ouptut combination and total economic profits that would result if competitors offer clones that make the market perfectly competitive.

    $2.19