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SOLO Inc. is a monopolist in a particular market. It has estimated that the inverse demand...

SOLO Inc. is a monopolist in a particular market. It has estimated that the inverse demand for its product is P = 100 - 2 Q, and the marginal cost of production is MC= 10 + 2 Q. If SOLO Inc. uses uniform pricing then to maximize profits it should select Q = 12.86 and P = 74.38. Q = 15 and P = 70. Q = 10 and P = 60. None of the above.

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Answer #1

Answer - The inverse demand curve of monopolist is, P = 100 - 2Q. Total revenue curve of the monopolist

TR = P *Q

TR = 100Q - 2Q2

We know MR = TR / Q

MR = 100 - 4Q

A monopolist will earn maximum profit where marginal cost is equal to marginal revenue, MC = MR

100- 4Q = 10 + 2Q

Add 4Q and subtract 10 from both sides

90 = 6Q

Q = 90/6

Q =15 units

Place this into demand equation

P = 100 - 2Q

P = 100 - 2*15

P = $70

Option C is the correct answer

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