(Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q². By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing price? A) $20 B) $15 C) $10 D) $5

Question

Quizplus · Accepted Answer

To find the profit-maximizing price, we need to set marginal revenue (MR) equal to marginal cost (MC):
MR = MC
20 - 2Q = 2Q
20 = 4Q
Q = 5
Now that we know the quantity that will maximize profit is 5, we can plug that back into the demand curve to find the corresponding price:
P = 20 - Q
P = 20 - 5
P = 15
Therefore, the profit-maximizing price is $15 (choice B).

(Scenario: a Monopolist) a Monopolist Faces a Demand Curve Given