Scenario 15-3
Suppose a monopolist has a demand curve that can be expressed as P=90-Q.The monopolist's marginal revenue curve can be expressed as MR=90-2Q.The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-3.The profit-maximizing monopolist will charge a price of
A) $50.
B) $40.
C) $20.
D) $10.

Question

Quizplus · Accepted Answer

To find the profit-maximizing price, set MR = MC. Here, MR = 90 - 2Q and MC = $10. Solving 90 - 2Q = 10 gives Q = 40. Substitute Q = 40 into the demand curve P = 90 - Q to find the price: P = 90 - 40 = $50.

Scenario 15-3 Suppose a Monopolist Has a Demand Curve That Can Be