Asked by Noemi Villalobos on May 14, 2024
Verified
A monopolist faces the inverse demand function described by p 23 5q, where q is output.The monopolist has no fixed cost and his marginal cost is $6 at all levels of output.Which of the following expresses the monopolist's profits as a function of his output?
A) 23 5q 6
B) 17q 5q2
C) 23 10q
D) 23q 5q2 6
E) None of the above.
Inverse Demand Function
A mathematical representation that describes the relationship between the price of a good and the quantity that consumers are willing and able to purchase, expressed as price as a function of quantity demanded.
Marginal Cost
The expenditure involved in the production of an extra unit of a good or service.
- Determine the best price and production level for a monopoly given different scenarios of cost and demand.
Verified Answer
AA
Abdifitah AbdullahiMay 17, 2024
Final Answer :
C
Explanation :
The monopolist's profit function is given by:
Profit = Total Revenue - Total Cost
Total Revenue = Price x Quantity
Total Revenue = [23 5q - 5q^2]
Total Cost = Marginal Cost x Quantity
Total Cost = 6q
Therefore, Profit = [23 5q - 5q^2] - 6q
Simplifying,
Profit = 23 10q - 5q^2
Hence, the correct choice is C.
Profit = Total Revenue - Total Cost
Total Revenue = Price x Quantity
Total Revenue = [23 5q - 5q^2]
Total Cost = Marginal Cost x Quantity
Total Cost = 6q
Therefore, Profit = [23 5q - 5q^2] - 6q
Simplifying,
Profit = 23 10q - 5q^2
Hence, the correct choice is C.
Learning Objectives
- Determine the best price and production level for a monopoly given different scenarios of cost and demand.