Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton.

Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton. This special kind of silica is produced by Thorpe Industries (a monopolist) that has a constant marginal and average total cost of $10 per ton. [up to 6 points]

Derive the inverse demand and marginal revenue curves faced by Thorpe Industries.
Equate marginal cost and marginal revenue to determine the profit-maximizing level of output.
Find the profit maximizing price for Thorpe Industries.
How would your answer change if marginal cost were instead given by MC = 10+Q?

Expert Solution

Rahul Sunny answered 1 year ago

Suppose that the demand for a special kind of silica is given by Q = 55...

Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton. This special kind of silica is produced by Thorpe Industries (a monopolist) that has a constant marginal and average total cost of $10 per ton. Derive the inverse demand and marginal revenue curves faced by Thorpe Industries. Equate marginal cost and marginal revenue to determine the...

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