(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. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. The profit-maximizing output level is 6, and the profit-maximizing price equals $12. What are its monopoly profits at this price and quantity?

Question

Quizplus · Accepted Answer

To calculate the monopoly profits, we first determine the total revenue (TR) and total cost (TC). Total revenue is price times quantity, so TR = $12 * 6 = $72. The total cost (TC) can be calculated using the given total cost function, but since we know the marginal cost (MC) is 2Q, we can integrate to find TC = Q^2, so TC = 6^2 = 36. Therefore, monopoly profits = TR - TC = $72 - $36 = $36.

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