You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Q_m = 700 - 100P_m,where Q_m = servings of fried mushroom and gravy, you would have a maximum possible total revenue of $1500.00.

Question

Quizplus · Accepted Answer

Given the demand equation QS = 700 - 100P, to find the maximum possible total revenue, we first need to find the quantity where revenue is maximized. Total revenue (TR) is price (P) times quantity (Q), TR = P*Q. The inverse demand function from the given demand equation is P = 7 - 0.01Q. The revenue function is TR = P*Q = (7 - 0.01Q)Q. To maximize revenue, we differentiate TR with respect to Q and set it to zero. The differentiation gives -0.02Q + 7 = 0, solving for Q gives Q = 350. Substituting Q = 350 back into the demand equation to find P gives P = 3.5. Therefore, the maximum possible total revenue is TR = P*Q = 3.5 * 350 = $1225.00, not $1500.00.

You Believe That You Have a Costless Monopoly