If an unregulated electric company is a monopolist,faces demand of Q = 100 - 50P,and has constant total costs,the profit-maximizing level of output is ?
A)50
B)100
C)25
D)12.5

Question

Quizplus · Accepted Answer

The profit-maximizing level of output is where marginal revenue equals marginal cost. In this case, marginal revenue is MR = 100 - 100P and marginal cost is MC = 0. Setting MR = MC, we get 100 - 100P = 0, which implies P = 1. Substituting P = 1 into the demand curve, we get Q = 100 - 50(1) = 50.

If an Unregulated Electric Company Is a Monopolist,faces Demand of Q