Earlier we mentioned the special case of a monopoly where MC = 0. Let’s find the firm’s best choice when more goods can be produced at no extra cost. Since so much e‑commerce is close to this model—where the fixed cost of inventing the product and satisfying government regulators is the only cost that matters—the MC = 0 case will be more important in the future than it was in the past. For each demand curve, calculate the profit-maximizing level of output and price as well as the monopolist's profit. a. ?=200−?P=200−Q, fixed cost = 1,000. Profit‑maximizing output Q = Profit‑maximizing price P = $
Earlier we mentioned the special case of a monopoly where MC = 0. Let’s find the firm’s best choice when more goods can be produced at no extra cost. Since so much e‑commerce is close to this model—where the fixed cost of inventing the product and satisfying government regulators is the only cost that matters—the MC = 0 case will be more important in the future than it was in the past. For each demand curve, calculate the profit-maximizing level of output and price as well as the monopolist's profit. a. ?=200−?P=200−Q, fixed cost = 1,000. Profit‑maximizing output Q = Profit‑maximizing price P = $
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
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Earlier we mentioned the special case of a monopoly where MC = 0. Let’s find the firm’s best choice when more goods can be produced at no extra cost. Since so much e‑commerce is close to this model—where the fixed cost of inventing the product and satisfying government regulators is the only cost that matters—the MC = 0 case will be more important in the future than it was in the past. For each demand curve, calculate the profit-maximizing level of output and price as well as the monopolist's profit.
a. ?=200−?P=200−Q, fixed cost = 1,000.
Profit‑maximizing output Q =
Profit‑maximizing price P = $
Monopolist's profit: $
b. ?=4,000−?P=4,000−Q, fixed cost = 900,000 (Driving the point home from part a)
Profit‑maximizing output Q =
Profit‑maximizing price P = $
Monopolist's profit: $
c. ?=120−12?P=120−12Q, fixed cost = 1,000
Profit‑maximizing quantity Q =
Profit‑maximizing price P = $
Monopolist's profit: $
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