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Calculating profit maximizing output and price level

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For a monopoly, total and marginal revenue relations are as follows:

TR = $250Q-$0.001Q2

MR = MTR/MQ = $250-$0.002Q

MC = $150

A. As a monopoly, calculate output, price and profits at the profit maximizing level.

B. What price and profit levels would prevail following expiration patent protection (assume perfectly competitive pricing would result).

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Solution Summary

Solution describes the steps for calculating profit maximizing ouput level, price and profit for a monopoly firm. It also calculates price and output level for the firm on expiry of patent protection.

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Solution:

A. As a monopoly, calculate output, price and profits at the profit maximizing level.

TR=250Q-0.001 Q^2

Marginal Revenue=MR=d(TR)/dQ=250-0.002Q

MC=150

A monopolist sets its output such that MR=MC to maximize his profits
Put ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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