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Question 5 A demand for the book is Q = 250 - 20p. The cost function is c(Q) = Q?15. What is the level of output that will ma
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Answer #1

Answer

1.
The correct answer is Q=25, P=10

A monopolist's profit-maximizing output level is where the marginal cost equals the marginal revenue or
MC=MR

Given

Q=250-20P

20P = - + 250 P= -0.05Q + 12.5 TR= PQ TR=(-0.05Q + 12.5) *(Q) TR = -0.052+12.5Q VD dTR MR=dQ d(-0.05Q2 + 12.5Q) MR= do MR= -0

TC=Q2/5

MC= Ma MC

Now let MC=MR
-0.1Q-+12.5=2Q/5
-0.5Q+62.5=2Q
2.5Q=62.5
Q=25

Substituting this in-demand equation
P=12.5-0.1Q
P=12.5-0.1(25)
P=10

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