Suppose you were hired to help a hospital set prices for a typical inpatient day.In this market,the hospital is a monopolist.The hospital faces a downward sloping demand curve where the inverse demand curve is ,the marginal revenue curve is equal to ,and marginal cost is constant at MC = $100 per day.What is the equilibrium price,quantity,and profit?

Question

Suppose you were hired to help a hospital set prices for a typical inpatient day.In this market,the hospital is a monopolist.The hospital faces a downward sloping demand curve where the inverse demand curve is  ,the marginal revenue curve is equal to  ,and marginal cost is constant at MC = $100 per day.What is the equilibrium price,quantity,and profit?

Quizplus · Accepted Answer

The Answer is The profit-maximizing price and quantity for a monopolist is always found where marginal revenue is equal to marginal cost,MR = MC.In this case,
MR=MC
500-2Q=100
400=2Q
Q=200
Using this value,for quantity we can find the equilibrium price by plugging quantity into the demand curve.P=500-200=300.Profit = (P-MC)Q = (300-100)(200)= $40,000.

Suppose You Were Hired to Help a Hospital Set Prices