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Eduncle posted an MCQ
October 19, 2019 • 19:32 pm 0 points
  • UGC NET
  • Economics

A monopolist faces a linear demand curve p = 100 = 4q, while his cost function is C = 50 + 20q. The profit maximising output for this monopolist is

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    Eduncle Best Answer

    The monopolist's total revenue,
    TR = p × q = 100q – 4q2.
    His marginal revenue,
    MR = 100 – 8q.
    Now, his total cost,
    TC = 50 + 20q.
    His marginal cost, MC = 20.
    The monopolist's profit maximizing output, q*, is the level at which MR = MC. Substituting MR = 100 – 8q and MC = 20, and doing the necessary calculations we obtain q* = 10.

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