Reference no: EM133328190

Question: Consider a market for laboratory services. In this market, there is a highly specialized laboratory that has a monopoly on performing a particular DNA test. To perform each DNA test, the laboratory must buy a testing kit from a monopoly manufacturer. The market demand for the DNA test is P = 720- Q. The marginal cost of C = 80 per testing kit.

A. What will be the quantity of DNA tests in this market? What will be the associated prices for the DNA test (P) and testing kits (M)? What will be the profits to the testing kit manufacturer and the laboratory that performs the test?

B. Suggest and describe a strategy that could improve the profits for both firms. Show any necessary calculations that support your strategy and briefly describe what your strategy accomplished that resulted in higher profit.

C. Go back to the situation described in the original description of the problem. Suppose that the testing kit manufacturer is still a. monopoly but that there are two competing laboratories. What will be the quantity of DNA tests and the associated prices P and M? What will be the profits to the testing kit manufacturer and the laboratories that perform the test?

D. Would the strategy you suggested in part B be able to improve on firm profits for the situation given in part C? Explain.