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Suppose the inverse demand for a monopolist’s product is given by P (Q) = 20 –...

  1. Suppose the inverse demand for a monopolist’s product is given by

P (Q) = 20 – 3Q                                              (Total marks = 5)

The monopolist can produce output in two plants. The marginal cost of producing in plant 1 is

MC1 = 20 + 2Q1

While the marginal cost of producing in plant 2 is

MC2 = 10 + 5Q2

  1. How much output should be produced in each plant?

  1. What price should be charged?

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