If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to
A) 16.
B) 21.
C) 25.
D) 58.

Question

Quizplus · Accepted Answer

To find the profit-maximizing quantity, we need to set the monopoly's marginal revenue equal to its marginal cost: 
MR = d(TR)/d(Q) = p + Q(dp/dQ) -16 = 100 - 4Q - 16 = 84 - 4Q 
Setting MR = MC: 84 - 4Q = 16, which solves to Q = 17. 
To find the optimal price, we substitute Q = 17 back into the inverse demand function: 
p = 100 - 2Q = 100 - 2(17) = 66. 
Thus, the optimal price is $66, which is answer choice D.

If the Inverse Demand Curve a Monopoly Faces Is P