Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

Question

Quizplus · Accepted Answer

To maximize profit, a monopolist produces where marginal revenue (MR) equals marginal cost (MC).

In this scenario, MR = 20 - 2Q and MC = 4.

Set MR = MC:

20 - 2Q = 4

Subtract 20 from both sides:

-2Q = -16

Divide by -2:

Q = 8

Therefore, a profit-maximizing monopolist would produce a quantity of 8.

Scenario 16-2 Suppose Market Demand for a Product Is Given by the by the Equation