1) The demand curve that a monopoly faces is Q D = 953 - 8P. Rearranging this yi
ID: 2909563 • Letter: 1
Question
1) The demand curve that a monopoly faces is QD = 953 - 8P.
Rearranging this yields the inverse demand curve P = 953/8 - QD/8.
The marginal revenue curve is MR = P = 953/8 - 2QD/8.
There are no fixed costs for the monopoly and marginal cost is constant so marginal and average cost are equal.
AC = MC = 4
What is the quantity this monopoly chooses to produce?
3) The demand curve that a monopoly faces is QD = 1,427 - 9P.
Rearranging this yields the inverse demand curve P = 1,427/9 - QD/9.
The marginal revenue curve is MR = P = 1,427/9 - 2QD/9.
There are no fixed costs for the monopoly and marginal cost is constant so marginal and average cost are equal.
AC = MC = 8
What is the price this monopoly can charge for what it produces?
Explanation / Answer
A monopolist chooses the amount of output to produce by finding the quantity at which marginal revenue equals marginal cost. It finds the price to charge by finding the point on the demand curve at that quantity.
MR = MC
953/8 - 2QD/8 =4
2QD=921
QD= 460.5
the price this monopoly can charge for what it produces is
1,427/9 - 2QD/9 =8
QD=677.5
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