Score: 0.5 of 1 pt 12 of 14 (13 complete Hw Score: 71 43%, 10 a %) Text Question

Question

Score: 0.5 of 1 pt 12 of 14 (13 complete Hw Score: 71 43%, 10 a %) Text Question 6.2 EQuestion Helg Woz Enterprises specializes in electrical components. The market for one particular component is perfectly competitive and in long run equilibrium. The marginal cost is constant at 30. Woz can develop a muc cheaper process for producing this comporer lower ng its margnal cost to 6. The R&D; oost of developing the new process w ld be F and Woz would be able to obtain a patent for and beoome a monopoly supplier of this component. Demand for the product over the relevant period is given by p 50-20 Suppose the cos ne investment is F 202. Are consumers made beter off by the actions taken by Woz? Does total surplus rise? If Woz invests, then the change in consumer surplus(&CS;) is Acs-4D (Enter your response as whole number.)

Explanation / Answer

Before R&D

P=MC

50- 2q = 30

q = 10 , P = 30

CS = 1/2*(20*10)= 100

After R&D

MC = 6

P= MC

50-2q= 6

q = 22, P= 6

CS = 1/2*(44*22) = 484

CS= 484-100 = 384

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