If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization
A) is achieved when 21 units are produced.
B) is achieved by setting price equal to 21.
C) is achieved only by shutting down in the short run.
D) cannot be determined solely from the information provided.

Question

Quizplus · Accepted Answer

To maximize profit, a monopoly sets MR=MC. In this case, MR is the derivative of the demand function:
MR = 100 - 4Q 
Setting MR = MC, we get: 
100 - 4Q = 16 
Solving for Q, we get Q = 21. 
Therefore, the answer is A - profit is maximized by producing 21 units.

If the Inverse Demand Curve a Monopoly Faces Is P