Question

A monopolist faces demand Q = 110 – P, and has a total cost of 50...

A monopolist faces demand Q = 110 – P, and has a total cost of 50 + 5Q + 2Q2. Then to
maximize profit, the monopolist should produce ___ units of Q and charge a P = ___.
(a.) 25.5; 72.5
(b.) 17.5; 75
(c.) 25.5; 84.5
(d.) 17.5; 92.5

Could you draw the graph with curves?

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Homework Answers

Answer #1

Option D

A monopolist maximizes profit producing at MR=MC

a given demand curve is

Q=110-P

Inverting the demand curve to inverse demand curve

Q=110-P

P=110-Q

MR=110-2Q ........ An MR curve is double sloped than the linear inverse demand curve

MC is a change in total cost and a change in function is found by differentiation

MC=dTC/dQ=5+4Q

equating MC=MR

5+4Q=110-2Q

6Q=105

Q=17.5

from the demand curve

P=110-17.5

P=92.5

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