Question

5. A monopolist faces a demand curve P = 60 – 2Q and initially faces a constant marginal cost MC = 4. (a) Calculate the profit-maximizing monopoly quantity and price, and compute the monopolist's total rev- enue and profits at the optimal price. (b) Suppose that the monopolist's marginal cost in- creases to MC = 8. Verify that the monopolist's total revenue goes down.

Answer 1

P60-20 -Prics x Quanly (60-20) Q Totai Revin uo TA) d TR MarginaR Reven u - d(609-24) da MRE 60-40 Pofit- maximizing monepaly 6 ndihon PMR=ML MREMC 60-40 = 4 > (Q = 14 Pe60-2(14) P60-20 PE 32 Pn'cs xQuanhhy Total Reven = 32 (14)44 - TR = 448 Total las Tofal Rvenu #proj 4 Q P Q Ptt392 414) 39 2 448

of course, menobolut Goes deon because Produced w dicease Quauhity MR=MC (Nes C0-4- B P- 60-24 P- 60-2(13) Q=13 Priu xQuamhy 24 (13) Teta Reenus (Nea) TR 442 down Hene TR P= mc 60-2004 17 Prics P) y Q28 TR-TC ndusty pofit = 28X - 4(28) Revenuo=Pn'u xGuanhly 4(24) 1 2

PMC P-8 60-20= 8 Q 26 Pr's xQuanhly T&tal Rumuo 2 26 TR 2203 Revenus in nueases Hhal Mence See We rem 2 to 20g whn mc inand from 4 h8