Question

Valentine is a producer in a monopoly industry. Her demand curve and total cost curve are given as follows: Q = 160 - 4P ; TC = 4Q. The price of her product will be:

Answer 1

Answer: b) $22

Step-by-step explanation:

A Monopoly will maximise output where Marginal Revenue equals Marginal cost.

Marginal revenue (MR) is the differential of Total revenue.

= (dTR/dQ ) 40Q - 0.25Q^2

= 40 - 0.5Q

Marginal Cost is the differential of Total cost.

= dTC/dQ

= 4

MR = MC

40 - 0.5Q = 4

36 = 0.5Q

Q = 72 units is the maximising quantity.

Price

Q = 160 - 4P

72 = 160 - 4P

4P = 160 -72

4P = 88

P = $22