Table 15-17
A monopolist faces the following demand curve:
-Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce
A)20 units.
B)30 units.
C)40 units.
D)50 units.

Question

Table 15-17
A monopolist faces the following demand curve: 
-Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce
A)20 units. 
B)30 units. 
C)40 units. 
D)50 units.

Quizplus · Accepted Answer

To maximize profit, a monopolist will produce where marginal revenue (MR) equals marginal cost (MC). In this case, the monopolist can calculate MR by finding the change in total revenue from selling one more unit, which is equal to the price times the quantity plus the change in price times the quantity. Thus, MR for the monopolist is: MR = $1463 - 0.2Q. Setting MR equal to MC = $18, we can solve for Q: $1463 - 0.2Q = $18. Solving for Q, we get 40 units. Therefore, the best choice for this monopolist is to produce 40 units to maximize profit.

Table 15-17 A Monopolist Faces the Following Demand Curve