Consider these curves: MC = 6Q AC = (50/Q) + 3Q Demand: P = 50 -...

Consider these curves:
MC = 6Q
AC = (50/Q) + 3Q
Demand: P = 50 - 2Q
MR = 50 - 4Q

1. For a monopolist, the profit-maximizing quantity will be ____. They will charge a price of ____ and make the profit ____. (Fill in blanks)

2. Graph the curves and label Qm, Price, and Profit

3. What quantity would maximize efficiency?

Solutions

Expert Solution

1) Use MR = MC

50 - 4Q = 6Q

Q = 50/10

= 5 units

P = 50 - 2*5 = $40

Profit = revenue - cost

= 5*40 - 50 - 3*5*5

= $75

2) Graph is shown below

3) Efficiency is maximized when P = MC is set

50 - 2Q = 6Q

Q = 50/8

= 6.25 units

Rahul Sunny answered 1 year ago

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