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    Managerial Economics - Optimal Output and Pricing

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    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?

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    Solution Preview

    The monopoly maximizes its profit at the quantity where Marginal Revenue (MR) = Marginal Cost (MC).

    To find MR, ...

    Solution Summary

    This solution shows how to use marginal analysis to calculate a firm's profit-maximizing Quantity and Price.