Information goods are characterized by high fixed cost and
very low or zero marginal cost. Suppose the government
grants the producer of an information good a patent so that
the producer is the only seller of that good.
a. If the government forces the producer to charge a price
equal to marginal cost, would the firm’s profit be greater
than, equal to, or less than zero?
b. If the government forces the producer to charge a price
equal to average total cost, would the firm’s profit be
greater than, equal to, or less than zero?