Question
Asked Feb 10, 2019
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A monopolist has a demand for its product that is P = A + BQ . It has no fixed costs. Marginal cost is constant at MC = C. Find the profit-maximizing quantity Q to produce and find the profit maximizing price P.
P = A + BQ
P= 315 + -8Q
MC=C
MC= 75

Expert Answer

Step 1

The given information:

 

Demand function is represented as follows:

 

P = 315 – 8Q                                                                                                   …… (1)

 

Marginal cost (MC) = 75

 

Fixed cost = $0

 

Step 2

Known fact:

 

Profit maximizing point:

 

The monopolist profit maximizing point will occur at where the marginal revenue and marginal cost intersect each other.

Step 3

Formula used:

 

Total revenue and marginal revenue formula:

...

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