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A monopolist faces a demand Q(p)=200-5p and have total costs C(q)=10q. What is the monopolists's choice...

A monopolist faces a demand Q(p)=200-5p and have total costs C(q)=10q. What is the monopolists's choice of output level? Group of answer choices

100

50

150

75

37.5

Solutions

Expert Solution

A monopolist produces at MR=MC

MC=change in total cost =first differentiation of cost function

MC=dC/dq=10

converting the demand curve to the inverse demand curve to find MR

Q=200-5P

5P=200-Q

P=40-0.2Q

MR=40-0.4Q ...... MR curves double sloped than an inverse linear demand curve

equating to MC

40-0.4Q=10

0.4Q=30

Q=75

The output is 75 units

Option 4

Rahul Sunny answered 2 years ago
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