Question

P = 84 - Q MC = 12 + 2Q

For the monopolist facing this demand curve with these costs, the profit- maximizing level of output is ___ units and price is ____ .
A. 24; $60
B. 18; $48
C. 31; $53
D. 18; $66
E. 24; $36

Answer 1

The profit-maximizing level of output for the monopolist is 18 units, with a price of $66 per unit, corresponding to option D.

Step-by-step explanation:

To determine the profit-maximizing level of output and price for the monopolist, we need to set MR (Marginal Revenue) equal to MC (Marginal Cost), as outlined in the figures provided. Assuming the standard linear demand, MR can be found by doubling the slope of the demand curve. Hence, MR would be calculated as 84 - 2Q. Setting MR equal to MC, we have:

84 - 2Q = 12 + 2Q

This simplifies to 4Q = 72, and thus, Q = 18 units. Substituting Q into the demand equation to find price:

P = 84 - Q

P = 84 - 18 = $66

Therefore, the profit-maximizing level of output is 18 units and the price is $66, which corresponds to option D.