You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Q_m = 1500 - 200P_m,where Q_m = servings of fried mushroom and gravy, a price of $3.75 and a quantity of 750 would yield you a maximum total revenue.

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Quizplus · Accepted Answer

To maximize total revenue, we need to find the price and quantity combination that gives the highest value for P*Q. We have a monopoly, so we can set the price at any level we want. Given the demand equation, we can find the quantity that maximizes revenue by taking the derivative of the revenue function with respect to Q and setting it equal to zero. This gives us Q = 3.75*5 = 18.75. Since we can't sell a fraction of a serving, we round down to 18. This gives us a revenue of $67.50 (18*3.75). This is the maximum revenue we can get, and it corresponds to a price of $3.75 and a quantity of 18 servings.

You Believe That You Have a Costless Monopoly