Answer to Question #204387 in Microeconomics for Tiara Chetty

Question

Scenario 1 for questions 11 and 12A monopolist faces the following demand curve, marginal revenue curve and total cost curve for its product:Q = 400 -2PMR = 200 -QTC = 10Q11.Refer to scenario 1. How much profit does the monopolist earn?

Answer 1

Solution

Q=400-2P

MR=200-Q

TC=10Q

MR=0

MR=200-Q=0

Q=0

Q is the revenue maximizing output

Q=400-2P

200=400-2P

2P=400-200

P=100 - profit maximizing price

$TR=P\times Q$

=100$\times200=20000$

TC= 10Q

$=10\times200=2000$

Profit= TR-TC

=20000-2000

=18,000 is the profit earned by the monopolist