Question

Find total profits of the monopolist under the following market conditions: Demand: P=250-4Q Fixed Costs =...

Find total profits of the monopolist under the following market conditions: Demand: P=250-4Q Fixed Costs = 200 MC = 50
Select one:
a. 2600
b. 2450
c. 2300
d. 2750

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Homework Answers

Answer #1

Demand: P=250-4Q

Total revenue(TR)= P x Q= 250Q-4Q2

Marginal revenue(MR)= Differentiation of TR with respect to Q= 250-8Q

MC= 50

For equilibrium price and quantity in monopoly, Put:

MC=MR

50= 250-8Q

8Q= 200

Q= 200/8= 25

Use Q= 25 in Demand function:

P= 250-4(25)= 250-100= 150

Total revenue(TR)= P x Q= 150 x 25= 3750

Variable cost= Integration of MC wrt Q= 50Q

Fixed cost= 200

Total cost(TC)= Fixed cost + variable cost= 200+50(25)= 200+1250= 1450

Total profit= TR-TC= 3750-1450= 2300

Option c is the correct answer

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