4. Assume that a monopolist sells a product with a total cost function TC = 1200

Question

4. Assume that a monopolist sells a product with a total cost function TC = 1200 + 0.50 2 and a corresponding marginal cost function MC = Q. The market demand curve is given by P=300-Q. (a) Find the monopolist's marginal revenue curve. (b) Find the monopolist's profit maximizing level of output c) Find the monopolist's profit maximizing price. d) Find the monopolist's marginal cost at the profit-maximizing level of output. e) Find the price elasticity of demand for this market at the profit-amg price and quantity. Does the inverse elasticity pricing rule hold? (Remember that price elasticity of demand is .) aPe

Explanation / Answer

(a)

Total revenue (TR) = P x Q = 300Q - Q2

Marginal revenue (MR) = dTR / dQ = 300 - 2Q

(b)

Profit is maximized by equating MR with MC.

300 - 2Q = Q

3Q = 300

Q = 100

(c) When Q = 100,

P = 300- Q = 300 - 100 = 200

(d) When Q = 100,

MC = Q = 100

NOTE: As per Chegg answering guidelines, first 4 parts are answered.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.