Question: As a small entrepreneur specialized in government contracts, you have enjoyed substantial economic profits derived from patents covering a memory chip used in security x-ray machines. You are now ready to introduce an upgraded version of the chip called ULTRA2008. Extensive analysis of past and current information has reveled that market demand for the ULTRA2008 can be expressed by

Where, Q is the quantity of ULTRA2008 chips sold per week and P is the price per unit. Fixed costs are nil because research and development expenses were paid with a government grant, and all other fixed costs have been fully amortized. Average variable costs are constant a $2,500 per unit.

a. Calculate the profit-maximizing price/quantity combination and economic profit per week while your firm enjoys an effective monopoly due to patent protection.

b. Determine the optimum markup price and contribution margin percent at the profit-maximizing activity level.

c. Now suppose that the patent expired and competitors offer clones that makes the ULTRA2008 market perfectly competitive. Calculate the profit-maximizing price/quantity combination. Show how the optimum markup price and contribution margin percent would change after clones are offered.