A monopolist faces the inverse demand curve p = 120

Name: A monopolist faces the inverse demand curve p = 120 - 6q. At what level of output is his total revenue maximized?
Brand: Quizplus
Rating: 4.8 (55 reviews)

Question

A monopolist faces the inverse demand curve p = 120 - 6q. At what level of output is his total revenue maximized?

Quizplus · Accepted Answer

Total revenue is maximized when marginal revenue equals zero. The marginal revenue curve has the same intercept as the demand curve but twice the slope. Thus, MR = 120 - 12q. Setting MR = 0 gives 120 - 12q = 0, solving for q gives q = 10.