A monopolist faces the inverse demand function described by p = 50 - 4q, where q is output. The monopolist has no fixed cost and his marginal cost is $5 at all levels of output. Which of the following expresses the monopolist's profits as a function of his output?

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Quizplus · Accepted Answer

The monopolist's profit function is total revenue minus total cost. Total revenue is pq = (50 - 4q)q = 50q - 4q^2. Total cost is 5q. Therefore, profit is (50q - 4q^2) - 5q = 45q - 4q^2.

A Monopolist Faces the Inverse Demand Function Described by P