Calculate the monopoly firm maximum profit

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Reference no: EM131808153

Suppose a monopoly firm faces the following demand function: p = 200 - 2Q. The monopoly has a constant marginal cost of $40 and a fixed cost of $1000. Answer the following questions:

a. Calculate the monopoly firm's maximum profit.

b. Calculate the size of the monopoly deadweight loss.

c. Suppose the firm is considering investing in R&D that, if successful, has 10% chance of reducing marginal cost to $20 and 40% chance of reducing marginal cost to $30. The R&D spending is considered to be a one-time fixed investment. Find the maximum amount of R&D spending the firm is willing to commit given the probabilities of success and the results of the process innovation.

Reference no: EM131808153

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