The inverse demand curve for a monopolist changes from P = 100 - 2Q to P = 120 -

Question

The inverse demand curve for a monopolist changes from P = 100 - 2Q to P = 120 -2Q, while the marginal cost of production remains unchanged at a constant $20. What happens to the profit-maximizing price and quantity following the change in the demand curve? The price rises from $40 to $60, and the output rises from 20 units to 30 units. The price rises from $60 to $70, and the output rises from 20 units to 25 units. The price rises from $10 to $20, and the output rises from 100 units to 120 units. The price rises from $50 to $60, and the output rises from 10 units to 12 units.

Explanation / Answer

Answer is B.

as we calculate it by MR = MC

P = 100-2Q

MR = 100-4Q

MC = 20

Q = 20

IF P = 120 - 2Q

MR = 120-4Q = 20

Q = 25

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