Waldman/Jensen – Industrial Organization Theory and Practice, Fourth Edition
Chapter 15
Page 27
Problem 2:
Before the cost-saving invention the monopolist’s profits were:
25.156)5.312()75.468()5.12)(25()5.12)(5.37()( =−=−=−=−=Π qLRACPqTCTR
M
With the introduction of the cost-saving device the monopolist’s profits would be
225300525)15)(20()15)(35()( =−=−=−=−=Π qLRACPqTCTR
M
Profits for the monopolist increase by (225-156.25)=68.75 as a result of the
introduction of the cost-saving device.
68.75.
