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Scenario: Monopolist
The demand curve for a monopolist is P = 75 - 0.5Q, and the monopolist has the following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing level of production is equal to $12.50.
-(Scenario: Monopolist) Look at the scenario Monopolist. The profit-maximizing output is _____ units and the profit-maximizing price is _____.
A) 25; $75.00
B) 20; $62.50
C) 25; $75.50
D) 25; $62.50

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Quizplus · Accepted Answer

The profit-maximizing output is found by setting MR = MC. MR = 75 - Q, so 75 - Q = 2Q. Solving for Q, we get Q = 25. The profit-maximizing price is then found by plugging Q = 25 into the demand curve: P = 75 - 0.5Q = 75 - 0.5(25) = $62.50.

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