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Question 4 A monopolist without patent protection would still have strong incentives to innovate, in order to maintain the monopoly position and profit levels of the firm. The competitive firm would be forced to innovate in order to survive, since there is no cushion of monopoly profits to fall back on. By staying ahead of competition, innovation is a way to earn profits that are in most cases above-normal, until others find their way.
For the monopolists who have patent protections, it is highly likely that innovation enticements are reduced. Monopolists may carry out very extensive research and programs for development unless such are forestalling some competition or bring hefty profits immediately (United States Federal Trade Commission, 2011).
Question 6
The bulk plastic industry analysis:
a. 20 QP = 800 TC = 300 + 500 Q + 10 Q2
20 Q2TR = 800Q MC = 500 + 20 Q
40 QMR = 800
40 Q, or 60 Q = 300, or Q* = 5MC = MR, implies: 500 + 20 Q = 800
20(5) = 700.P* = 800
c. MC = MR, as is the case in competition.
500 + 20Q = 620, or 120 = 20 Q, or Q* = 6 and P* = $620 (Donfeld and Aurich, 2010).
Question 9
Branding of Iron Products contaminate air and water
The tax alternative is more considerable to some factors as; internalization of the firm, thus eventual price adjustment, output, and profit maximization through production technology, with a consideration of the generated externalities. The hardest aspect in considering this alternative is the specification of the pollution tax rate amount which acts to guide the firm in managing its pollution rates satisfactorily.
It is almost certainly not sought-after to utterly rule out pollution by the firm, since it is likely that the cost of eliminating the last few percentage points of pollution will be very high.
Like the Coase Theorem, if Branding Iron has a property right to pollute, it could be paid to reduce that pollution. Indeed, there is a presumption that Branding Iron was operating for some time before the “new residents” start to complain (McGuigan, Moyer and Harris, 2010).
References
Donfeld, D. and Aurich, J. (2010). Burrs – Analysis, Control and Removal: Proceedings of the Cirp International Conference on Burrs, 2nd-3rd April, 2009, University of Kaiserslautern, Germany. London: Springer.
McGuigan, J., Moyer, R. and Harris, F. (2010). Managerial Economics: Applications, Strategy and Tactics (with InfoApps 2-Semester Printed Access Card). New Jersey: Cengage Learning.
United States Federal Trade Commission (2011). To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy. New York: DIANE Publishing.