Question

In: Economics

One big international bakery group has bought all the existing individual bakery stores and formed a...

One big international bakery group has bought all the existing individual bakery stores and formed a monopoly. The market demand remains the same and the marginal revenue of the monopoly is MR = 25-5Q. This monopoly re-allocates all the production resources, and finally its total cost becomes TC=3Q2 -8Q+9 and its marginal cost is MC= 6Q-8, where Q is in millions of units. What will be the selling price and profit for this monopoly? Illustrate the profit-maximizing price and quantity in a diagram.

Expert Solution

For Monopoly, at eqm

MR = MC

25-5Q = 6Q-8

33 = 11Q

Qm = 3

Pm = 25 - 2.5Q

= 25-2.5*3

= $ 17.5

( As demand Curve have Slope, half to that of the MR curve )

so Demand Curve: P = 25 - (5/2)Q )

profit = TR - TC

= 3*17.5 - ( 3*9 -8*3 +9)

= 52.5 - 27 +24 -9

= $ 40.5

.

graph

Rahul Sunny answered 2 years ago

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