Question

Supertech Pty Ltd. enjoys an exclusive patent on a process to accurately detect water without expensive drilling or core samples. Demand function for the water detection process is

                                              P = 280 – 0.005 Q

                                         where P is price and Q is quantity of output

Total costs (TC) for this process is given by the following relation:

                                              TC = 100Q

1. As a monopolist, calculate Supertech’s quantity, price and profits at the profit maximising output level.  

2. Following expiration of copyright protection, the market now becomes perfectly competitive. What price, quantity and profit levels would then prevail?

Answer 1