Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
-Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing price?

Question

Quizplus · Accepted Answer

With a $5 tax, the new MC becomes 10. Setting MR = MC: 100 - Q = 10, Q = 90. Substitute Q = 90 into the demand equation: 90 = 200 - 2P, solving gives P = $55.00.

Scenario 10.2: A Monopolist Faces the Following Demand Curve, Marginal Revenue Curve