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Monopoly, welfare and quality choice.
A monopolist can produce a high quality product and face demand of Q = 60-½ P, Marginal cost = 12 and Fixed cost = 800 or a low quality product and face demand of Q = 60-P, Marginal cost = 4 and Fixed cost equal 100.
a) Will the monopolist choose high quality or low quality?
b) If monopoly pricing is assumed then is the monopolist's choice of quality efficient?
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