You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q.Your costs are C = 10 + 3Q.The revenue-maximizing output is:
A) 10/63.
B) 5.
C) 6.3.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

The revenue-maximizing output is found by setting marginal revenue equal to marginal cost.
Marginal revenue = ΔTR/ΔQ = P + Q(dP/dQ) 
Marginal cost = ΔTC/ΔQ = 3
Setting MR = MC:
63 - 10Q - 5Q = 3
Solving for Q, we get Q = 6.3. Therefore, the revenue-maximizing output is 6.3.

You Are the Manager of a Monopoly That Faces a Demand