Question

A monopolist faces the following demand curve: Price Quantity $10 5 $9 10 $8 16 $7...

A monopolist faces the following demand curve:

Price

Quantity

$10

5

$9

10

$8

16

$7

23

$6

31

$5

45

$4

52

$3

60


The monopolist has total fixed costs of $40 and a constant marginal cost of $5. What is the profit-maximizing level of output?
Select one:
?a. 31 units
?b. 7 units
?c. 16 units
?d. 23 units

Homework Answers

Answer #1
P Q TR MR FC VC TC Profit
10 5 50 40 25 65 -15
9 10 90 8 40 50 90 0
8 16 128 6.33 40 80 120 8
7 23 161 4.71 40 115 155 6
6 31 186 3.13 40 155 195 -9
5 45 225 2.79 40 225 265 -40
4 52 208 -2.43 40 260 300 -92
3 60 180 -3.50 40 300 340 -160

MC of n the unit=(TC of n units -TC of p units )/(n-p)...............n>p


TR=P*Q

MR of n th unit=(TR of n units -TR of p units)/(n-p)...................n>p

profit=TR-TC
profit is maximum at MR=MC or the closest lower MC

where Q=16 units

Option c

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