Question

Use the following to answer questions (7) through (9):

A monopolist faces the following market demand: Q = 1000 - P, where Q is quantity demanded and P is the price. Suppose the firm’s total cost is given by: TC = 200Q. Hence, marginal cost equals average total cost equals 200.

[7] Absent the ability to price discriminate, the monopolist wishing to maximize profit will produce and sell a quantity equal to:

A.         200

B          400

3. 600
4. 800

[8] Absent the ability to price discriminate, the monopolist wishing to maximize profit will set a price equal to:

A. $800 B. $600 C. $400

D.         $200

[9]        Absent the ability to price discriminate, the maximum profit the monopolist can earn exceeds $100,000.

1. True
2. False

Answer 1

- Market demand : d = 1000m => P = 1000re = 2000 - p (T.R) Por Total cost : TC=200 d .me=200 Total Revenue = P.d = (10oorala ToR = loooll-ce? Marginal Revenue - die - lowo-26 At optimal o. M.Ramec a 1000-24 2200 for ca 1 [noore The profit maumizing amantity is you. The profit maximizing Price : 'Tpaboo] for profit maximizing price is $600 The maximum profit : T = PQ-T. L = P4- 200 a (60o-20o) you ..: S = $160000 The profit maximized at $160000 which is greeter than 100000 so, the statement is true. 2 = 1000-yoo