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A drug company company is a monopoly supplier of Drug X which
is protected by a patent. The demand for the drug is
p = 100 -X
and the monopolist's cost function is
C = 25 + X^2
i. Determine the profit maximizing price and quantity of the
monopolist.
ii. Suppose the patent expires at a certain point in time, and
after that any new drug company can enter the market and
produce Drug X, facing the same cost function. What will be
the competitive equilibrium industry output and price? How
many firms will be there in the market?
How to find the number of firms in part (ii)?
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