2. Consider a perfectly competitive firm that has a cost function given by c(q)=10+15q+21q2. a)...
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2. Consider a perfectly competitive firm that has a cost function given by c(q)=10+15q+21q2. a) If the market is perfectly competitive and the market price is $25, what is the firm's profit maximizing level of output and what level profits would they earn? b) Suppose now the firm can engage in a cost reducing innovation, reducing the cost function to c(q)=10+10q+41q2. If the market demand curve is given by p(q)=7021q, what price would the monopolist charge if they innovated and acted as a monopolist? c) If the firm innovates would they be able to sustain the monopoly price found in part b? In other words, would this be considered a drastic innovation? Explain. d) Based upon your answers to a - c, what would be the value of the innovation to the firm
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