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Monopoly Price and Profit-Maximizing Output

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Suppose that a monopoly faces an inverse market demand function:

P = 100-2Q

and its marginal cost function is:

MC = 40 - 2Q.

a. What should be the monopoly's profit-maximizing output?
b. What is the monopoly's price?

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Solution Preview

a) The monopoly maximizes its profit at the output quantity where Marginal Revenue (MR) = MC.

To find MR, ...

Solution Summary

Given only a monopolist's inverse market demand function and its marginal cost function, this solution shows how to find the monopolist's profit-maximizing price and output. All calculations are shown in full.