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