A monopolist faces a demand function defined as Q = 20 - 2P. The monopolist's marginal cost is equal to $5 at all levels of output. How many units of output should the firm produce to maximize profits?

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To maximize profits, the monopolist sets marginal revenue (MR) equal to marginal cost (MC). The inverse demand function is P = 10 - 0.5Q. The total revenue (TR) is P*Q = (10 - 0.5Q)Q = 10Q - 0.5Q^2. The marginal revenue (MR) is the derivative of TR, MR = 10 - Q. Setting MR = MC gives 10 - Q = 5, so Q = 5.

A Monopolist Faces a Demand Function Defined as Q =