A monopolist faces market demand given by P = 250

Question

A monopolist faces market demand given by P = 250 - 0.5Q.For this market,MR = 250 - Q and MC = 150.What price will the monopolist charge in order to maximize profits

Quizplus · Accepted Answer

To maximize profits, a monopolist sets MR = MC. Here, MR = 250 - Q and MC = 150. Setting them equal gives 250 - Q = 150, so Q = 100. Substituting Q = 100 into the demand equation P = 250 - 0.5Q gives P = 250 - 0.5(100) = 200. Thus, the monopolist will charge a price of $200.