Suppose a monopolist has TC = 100 + 10Q + 2Q2, and the demand curve it faces is p = 90 - 2Q. What will be the price, quantity, and profit for this firm?
What will be an ideal response?
First, determine MR = 90 - 4Q. Second, MC = 10 + 4Q. Setting MR = MC yields
90 - 4Q = 10 + 4Q. Rearranging yields 80 = 8Q or Q = 10. Price equals 90 - 2(10 ) = 70. Total revenue = 70 ∗ 10 = 700. Total cost equals 100 + 10(10 ) + 2(102 ) = 400. Profit equals
700 - 400 = 300.
Economics
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