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 earn profits of
A)$6,400.
B)$3,200.
C)$1,600.
D)$800.

Question

Quizplus · Accepted Answer

To find the profit-maximizing quantity, set MR = MC: 90 - 2Q = 10, solving gives Q = 40. The price at Q = 40 is P = 90 - 40 = 50. Profit is (P - ATC) * Q = (50 - 10) * 40 = $1,600.

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