Managerial Economics 13th Edition by James McGuigan,Charles Moyer,Frederick Harris

Exercise 4

An industry produces its product, Scruffs, at a constant marginal cost of $50. The market demand for Scruffs is equal to
Q = 75,000 600P
a. What is the value to a monopolist who is able to develop a patented process for producing Scruffs at a cost of only $45
b. If the industry producing Scruffs is purely competitive, what is the maximum benefit that an inventor of a process that will reduce the cost of producing Scruffs by $5 per unit can expect to receive by licensing her invention to the firms in the industry