Monopoly Versus Perfectly Competitive Equilibrium
Big Apple Music, Inc., enjoys an exclusive copyright on music written and produced by the Fab Four, a legendary British rock group. Total and marginal revenues for the group's CDs are given by the following relations:
TR = $15Q - $0.000005Q2:
MR = DTR/DQ = $15 - $0.00001Q
Marginal costs for production and distribution are stable at $5 per unit. All other costs have been fully amortized.
A. Calculate Big Apple's output, price, and profits at the profit-maximizing activity level.
B. What record price and profit levels would prevail following expiration of copyright pro- tection based on the assumption that perfectly competitive pricing would result?