Barnacle Industries was awarded a patent over 15 years ago for aunique industrial strength cleaner..

Barnacle Industries was awarded a patent over 15 years ago for aunique industrial strength cleaner that removes barnacles and otherparticles from the hulls of ships. Thanks to its monopoly position,Barnacle has earned more than $160 million over the past decade.Its customers—spanning the gamut from cruise lines tofreighters—use the product because it reduces their fuel bills. Theannual (inverse) demand function for Barnacle’s product is given byP = 380 -0.00009Q,and Barnacle’s cost function is given by C(Q) =270Q. Thanks to subsidies stemming from an energy bill passed byCongress nearly two decades ago, Barnacle does not have any fixedcosts: The federal government essentially pays for the plant andcapital equipment required to make this energy-saving product.Absent this subsidy, Barnacle’s fixed costs would be about $9million annually. Knowing that the company’s patent will soonexpire, Marge, Barnacle’s manager, is concerned that entrants willqualify for the subsidy, enter the market, and produce a perfectsubstitute at an identical cost. With interest rates at 6 percent,Marge is considering a limit-pricing strategy.