Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-4. The profit-maximizing monopolist will charge a price of
A)$50.
B)$40.
C)$20.
D)$10.

Question

Quizplus · Accepted Answer

The monopolist maximizes profit where MR = MC. Given MR = 90 - 2Q and MC = $10, set 90 - 2Q = 10, solving gives Q = 40. Substitute Q = 40 into the demand curve P = 90 - Q to find the price: P = 90 - 40 = $50.

Scenario 15-4 Suppose a Monopolist Has a Demand Curve That Can Be