A monopolist faces the following demand curve: P = 12

Question

A monopolist faces the following demand curve: P = 12 - .3Q with marginal costs of $3.What is the monopolistic PRICE?
A)P = $5.50
B)P = $6.50
C)P = $7.50
D)P = $8.50
E)P = $9.50

Quizplus · Accepted Answer

To find the monopolistic price, first find the marginal revenue (MR) by differentiating the total revenue (TR = P*Q = (12 - 0.3Q)Q). MR = 12 - 0.6Q. Set MR equal to marginal cost (MC = $3) to find Q: 12 - 0.6Q = 3, solving gives Q = 15. Substitute Q = 15 back into the demand equation to find P: P = 12 - 0.3(15) = $7.50.