Price and quantity combination of profits

Reference no: EM1312128

During recent years, MBI, Inc. has enjoyed substantial economic profits derived from patents covering a wide range of inventions and innovations. A recent software product, QuickerBetter, has proven especially profitable. Market demand and marginal revenues for this software product are:

P = $5,500 - $0.05*Q

MR = $5,500 - $0.10*Q

Where P is the product price, its quantity sold is Q and MR is the marginal revenue of the product. Fixed costs are zero since the research and development expenses have been fully amortized in previous periods. Average variable costs are constant at $4,500 per unit.

1. Calculate the price/output combination and the total economic profits that would result if competitors offer clones that make the QuickerBetter market competitive.

2. What are the economic tradeoffs of allowing patent protection and effective monopolies from a societal perspective? Explain.

Reference no: EM1312128

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