In: Economics
Profit maximizing single price monopoly. Demand for the product is given by: QD=50-2P; total cost: TC=10+6q+0.5q2
a. Determine price he would charge as single price monopolist
b. calculate markup
c. determine quantity he would produce
d. calculate profit earned
a. Equating marginal revenue of the firm with the marginal cost of the firm:
P = 25-0.5Q
TR= 25Q- 0.5 Q2
MR= 25 - Q
MC = 6 + Q
25-Q = 6 + Q
Q = 19/2= 9.5 units and P =25 - 19 /4 = $20.25
b. P - MC / P = 0.306 = 0.31 approximately
c. Quantity produced = 9.5 units.
d. Total revenue = Price * Quantity = 20.25 * 9.5 = $192.375
Total cost at Q = 9.5 = 112.125
Profits = total revenue - total cost = $80.25