Question

The following table shows the demand curve facing a monopolist who produces at a constant marginal cost of $8.00. Show all work.

TR MR Price Quantity 180 16 14 8 12 12 10 16 20 6 24 4 28 2 32 0 36 8

The firm's profit-maximizing output is ___________ & The corresponding price is $___________________

Answer 1

TR = P * Q

MR = Change in TR / Change in Q

P	Q	TR	MR
18	0	0
16	4	64	16
14	8	112	12
12	12	144	8
10	16	160	4
8	20	160	0
6	24	144	-4
4	28	112	-8
2	32	64	-12
0	36	0	-16

Setting MR = MC = 8 for profit maximization, we see

profit maximizing output = 12

profit maximizing price = 12