You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.The profit-maximizing output for your firm is:
A) 3.
B) 4.
C) 5.
D) 6.

Question

Quizplus · Accepted Answer

To find the profit-maximizing output, we need to set marginal revenue equal to marginal cost.

First, we need to find the marginal revenue function: 
MR = ∂TR/∂Q = ∂(P*Q)/∂Q = P + Q*(∂P/∂Q)

In this case, P = 63 - 5Q, so 
∂P/∂Q = -5

Therefore, MR = 63 - 5Q - 5Q = 63 - 10Q

Now we can set MR equal to MC: 
63 - 10Q = 3

Solving for Q, we get Q = 6

Therefore, the profit-maximizing output for the firm is 6.

You Are the Manager of a Monopoly That Faces a Demand