1 answer

A monopolist faces the price equation P = 1,000 – 0.5Q, and cost is given as TC = 400 +

Question:

A monopolist faces the price equation P = 1,000 – 0.5Q, and cost is given as TC = 400 + 100Q +2.5Q^2.Determine the profit at the revenue maximizing level and the profit maximizing level. Compare the answers above and comment on the appropriate goal of the firm.

Answers

Always always always, maximize where MC=MR

Total revenue is P*Q = 1000Q- 0.5Q^2. MR is the first derivative of TR. So, MR=1000 - Q
MC is the first derivative of TC. So, MC=100 + 5Q
MC=MR is 100+5Q = 1000-Q. solve for Q.

Then plug the optimized Q into TC and TR to derive the profit..

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