Consider a monopolist that produces a good at a constant marginal and average co

Question

Consider a monopolist that produces a good at a constant marginal and average cost of 5$. The market demand is given by p=53-Q
A) calculate the monopolists profit at the profit at the profit maximizing equilibrium Consider a monopolist that produces a good at a constant marginal and average cost of 5$. The market demand is given by p=53-Q
A) calculate the monopolists profit at the profit at the profit maximizing equilibrium
A) calculate the monopolists profit at the profit at the profit maximizing equilibrium

Explanation / Answer

Demand: P = 53 – Q

Marginal Revenue = 53 – 2Q

Profit-maximising output is where MR – MC

53 – 2Q = 5

2Q = 48; Q = 24.

P = 53 – Q which is equal to 53 – 24

P = $29

# (profit) = TR – TC

# / Q = P – AC (per unit)

Profit per unit = P – AC

Profit per unit = $29 – $5 = $24

Total profits of the monopolist = $24 x 24 (Q) = $576.

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