If the inverse demand curve a monopoly faces is p = 170 - 2Q, and MC is constant at 10, then profit maximization is achieved when the monopoly sets price equal to
A. 58.
C. 40.
B. 21.
D. 16.
Answer: A. 58
profit maximization happens when the price is 58.
If p=58
58 = 170-2q
2Q= 170-58
q = 56
Revenue = 56*58 = 3248
Total marginalc cost = 56*10 = 560
Profit = 2688
If P = 40
40 = 170-2q
2q = 170-40
q = 65
Revenue = 40*65 = 2600
Total marginal cost = 650
Profit = 1950
If P=21
21 = 170-2q
2q = 170-21
q = 74.5
Revenue = 74.5*21 =1564.5
Total margial cost =210
Profit = 1354.5
If P = 16
16=170-2q
2q = 170-16
q = 77
Revenue = 77*16 = 1232
Total marginal cost = 160
Profit = 1072
Get Answers For Free
Most questions answered within 1 hours.