Explore BrainMass
Share

Explore BrainMass

    Demand, Marginal Revenue, Profits for a Monopolist

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    2. Suppose you are the manager of Alpha Enterprises, a firm that holds a patent that makes it the exclusive manufacturer of bubble memory chips. Based on the estimates provided by a consultant, you know that the relevant demand and cost functions for bubble memory chips are Q = 25 - .5P; C = 50 + 2Q.

    a. What is the firm's inverse demand function?
    b. What is the firm's marginal revenue when producing 4 units of output?
    c. What level of output would maximize profits?
    d. At what price would you maximizing profits?
    e. What will be the dollar level of your profits?

    © BrainMass Inc. brainmass.com October 9, 2019, 3:57 pm ad1c9bdddf
    https://brainmass.com/economics/output-and-costs/demand-marginal-revenue-profits-for-a-monopolist-18155

    Solution Preview

    A. Q = 25 - 0.5P --> 0.5P = 25 - Q --> P = 50 - 2Q
    B. Revenue = P * Q = (50 - 2Q) * Q = 50Q - 2Q^2
    Marginal revenue = 50 - 4Q ...

    Solution Summary

    This solution looks at the inverse demand function, marginal revenue, maximum profits for a firm with a patent (monopolist).

    $2.19