Question

(Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing output level?

Answer 1

Profit-maximizing output level = 5 unit

Step-by-step explanation:

Given:

P = 20 - Q

TC = 2Q

MR = 20 - 2Q

MC = 2Q

Find:

Profit-maximizing output level

Computation:

Profit-maximizing output level.

MR = MC

20 - 2Q = 2Q

Q = 5

Profit-maximizing output level = 5 unit