Your local monopoly is considering selling several units of homogeneous product as a single package. A typical consumer's inverse demand function is P = 200 - 4Q. Marginal cost is $120.
a. Determine the optimal number of units to put in a package.
b. How much should the firm charge for this package?
The monopoly maximizes its profit at the quantity where Marginal Revenue (MR) = Marginal Cost (MC).
To find MR, ...
This solution shows how to use marginal analysis to calculate a firm's profit-maximizing Quantity and Price.