Calculate the optimal parameters in the given case.

Please help with the following problems. Provide step by step calculations.

A monopolist produces trinkets at $2/unit. The demand for trinkets as a function of unit price p is: D(p) = 100-p.

1) At a unit price of $10, what will the demand be?
2) At a unit price of $10, what will total revenue be?
3) At a unit price of $10, what will the total cost of production be?
4) What is the monopolist's profit maximizing price?
5) Use the markup formula to determine the elasticity of demand at this price.
6) What is the monopolist's maximum profit?

Solution Preview

1) At a unit price of $10, what will the demand be?
D(10)=100-10=90 units

2) At a unit price of $10, what will total revenue be?
Total Revenue=p*D(p)=10*90=$900

3) At a unit price of $10, what will the total cost of production be?
Total Cost=Per unit cost*total output=2*90=$180

4) What is the monopolist's profit ...

Solution Summary

This solution depicts the steps to estimate the monopolist's optimal output level and price. Detailed, step-by-step calculations are provided for each.

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