SCENARIO: A MONOPOLIST
A monopolist faces a demand curve given by P = 20 - Q and has total
Costs given by TC = Q2.By using a bit of calculus, you should be able
To determine that the firm's marginal revenue is MR = 20 - 2Q and its
Marginal cost is MC = 2Q.
Reference: Ref 93
(Scenario: A Monopolist) Now suppose that the country in which this
Monopolist is located decides to engage in international trade.The
World price of the product produced by the monopolist is $12.What is
The monopolist's profitmaximizing output level?

Question

SCENARIO: A MONOPOLIST
A monopolist faces a demand curve given by P = 20 - Q and has total
Costs given by TC = Q2.By using a bit of calculus, you should be able
To determine that the firm's marginal revenue is MR = 20 - 2Q and its
Marginal cost is MC = 2Q.
Reference: Ref 9­3
(Scenario: A Monopolist) Now suppose that the country in which this
Monopolist is located decides to engage in international trade.The
World price of the product produced by the monopolist is $12.What is
The monopolist's profit­maximizing output level?

Quizplus · Accepted Answer

The monopolist will produce where MR = MC. With international trade, the world price becomes the marginal revenue, so MR = $12. Setting MR = MC gives 12 = 2Q, solving for Q gives Q = 6.

SCENARIO: a MONOPOLIST A Monopolist Faces a Demand Curve Given by P =