(Solved): Geoffrey is an entrepreneur who has an idea for a new online bookseller named Wallacea. Geoffrey is ...

Geoffrey is an entrepreneur who has an idea for a new online bookseller named Wallacea. Geoffrey is convinced that he can corner the market in his city and be the only online bookseller servicing the region. Geoffrey has undertaken significant market research and forecasting to determine that: MC = $5 Market Demand: QD = 10 - 1/2P TR = 20Q - 2Q^2 Using the above information, and assuming that Geoffrey is correct that Wallacea will be the only firm in this market, plot the Marginal Revenue curve, the Demand curve, and the marginal cost curve on a diagram. a. Find the profit maximising price and quantity and, if applicable, highlight the deadweight loss on the curve. b. Calculate the competitive equilibrium price P* and quantity Q* and, if applicable, calculate the size of the deadweight loss highlighted in part (a). Calculate the profits Wallacea would achieve under the price and quanity calculate in part (a), and compare it to profits Wallacea would achieve under the price and quantity calculated in part (b). c. Geoffrey has an idea to use drones to deliver his products. He does some more research and determines that if he went through with this idea, his total cost function would be: TC = 30 + 2Q. Again, assuming that Geoffrey is correct about being the only firm in the market, calculate Wallacea's profits if they adopted this drone delivery approach. Should they switch? d. A competitor named Daintree emerges. Wallacea and Daintree find themselves in a standoff of sorts. Wallacea is deciding whether or not to enter the market and go ahead with its business plan. Meanwhile, Daintree must also decide whether or not to enter the market, however Daintree will wait to observe Wallacea's action before making its decision. The gametree below (see image) describes the situation: Where π' > π* and π' > 1. What is the rollback equilibrium outcome of this game? E. Years later, after successfully establishing itself as the dominant online bookseller in its market, Wallacea trys to introduce a new premium service to complement its basic service. Due to the extensive amount of data that Wallacea managed to collect on all of its customers, it knows the following about its 1,000 Prime customers and its 1,000 normal customers: Table 2 (see image) Willingness to Pay for Premium and Basic Service Willingness to Pay Premium Basic Prime Customers $30 $20 Normal Customers $20 $18 Marginal Cost $10 $5 e. What is the profit maximising price that Wallacea should offer for its premium service and its basic service? What is the associated profit?