The Athletic Medicine Center in Madison, Wisconsin, enjoys pricing power in the practice of medicine. Market demand and marginal revenue relations for a standard medical procedure to repair damaged knee cartilage are:P = $5,000 – $0.05QMR = ¶TR/¶Q = $5,000 – $0.1QFixed costs are nil, and average variable costs are constant at $4,000 per unit.A.Calculate the profit-maximizing price/output combination and economic profits if the Athletic Medicine Center enjoys an effective monopoly.B.Calculate the price/output combination and total economic profits that would result if new entrants create a perfectly competitive market.
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