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Unformatted text preview: (iii) Assume the industry is perfectly competitive and each ﬁrm in the industry has constant marginal costs of c = 40 . Find the competitive equilibrium price and quantity. (iv) Assume one ﬁrm innovates and reduces its marginal cost to c = 20 . It patents the innovation. Assume it prices at the price found in (iii) less 1 cent. Calculate the innovator’s proﬁt (Ignore the 1 cent). (v) Given this analysis, which industry structure, monopoly or perfect competition, has the greater incentive for innovation? Explain. 2. Given patents provide innovators with monopoly rights for many years, why would a ﬁrm chose to keep a new technology secret rather than patent it? 1...
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This note was uploaded on 02/16/2010 for the course ECOS Economics taught by Professor None during the One '09 term at University of Sydney.
- One '09