A monopolistic firm faces the following demand curve. Q = 8000 -10 P This monopo

Question

A monopolistic firm faces the following demand curve. Q = 8000 -10 P This monopoly's cost function has been estimated as follows: TC = 480,000 + 40 Q a. What price should this monopoly charge to maximize its profit? b. What would be its equilibrium profit? c. What price should it charge if it were to maximize its revenue? d. What would be its profit if it maximized its revenue? e. If this monopoly were to behave like a competitive firm, what price should it charge and what quantity should it produce? f. Would this monopolist still make an economic profit if it were to behave like a competitive firm? g. What is the break-even quantity of this monopoly?

Explanation / Answer

a.TR= P *Q

=8000P-10P^2

MR= FDIFFERENTIATION OF ABOVE FN

=8000-20P

MC = DIFFERENETIATION OF TC FN

MC=40

PROFIT MAXIMISATION EQN

8000-20 P=40

7960=20P

P=398

PRICE IS 398

2.SOLVING FROM ABOVE EQN

Q=4020

THUS PROFIT= 4020 * 398=1599960

3.EQUATION MR =0

8000-20P=0

P=400 in which revenue will be maximised

4.from above q-4000

thus profit should be

TR- TC

=P*Q-TC

=16000000-640000

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