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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).

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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