Scenario 12.3:
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows:
P = 30 - Q
The marginal cost to produce this new drink is $3.
-Refer to Scenario 12.3. What is the monopoly price of this new drink?

Question

Quizplus · Accepted Answer

To find the monopoly price, we need to find where marginal revenue (MR) equals marginal cost (MC). 
The demand curve is P=30-Q, so total revenue (TR) is (30-Q)Q=30Q-Q^2. 
Marginal revenue (MR) is the derivative of TR with respect to Q, which is MR=30-2Q. 
Setting MR=MC, we get 30-2Q=3, so Q=13.5. 
Substituting Q back into P=30-Q, we get P=16.5. Therefore, the monopoly price of this new drink is $16.50. 
So, the best choice is D.

Scenario 12.3: Suppose a Stream Is Discovered Whose Water Has Remarkable Healing