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Suppose the (inverse) demand function for a single-price monopoly is P=280-2Q
Suppose the (inverse) demand function for a single-price monopoly is P=280-2Q. This means that the marginal revenue function for the monopolist is MR=280-4Q. Assume the marginal cost function is given by MC=3Q. Find the price that the monopolist will charge. Hint: You will first have to find the quantity and then plug this into the demand function to find the price. This is a fill-in-the-blank problem. Just enter your answer as a number (do not enter text, dollar signs, or anything else).
Expert Solution
The monopoly will produce at a level where marginal revenue is equal to marginal cost, i.e.,
- 280 - 4Q = 3Q
- 280 = 7Q
- Q = 40
Plugging the quantity into the demand function, we can uncover the price:
- P = 280 - 2 * 40
- P = 200
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