Tiny is a small, isolated community served by one newspaper that can meet the ma

Question

Tiny is a small, isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The tiny intelligencer is the only source of news. The graph shows the marginal cost of printing the tiny intelligencer and the market demand for it. The tiny intelligencer is a profit maximizing, single price monopoly What is the efficient number of copies of the newspaper and what is the price at which the efficient number of copies of the tiny intelligencer is and the price at which this number could be sold is cents a copy

Explanation / Answer

For profit maximising monopoly, equilibrium occurs at Mr=MC.

MR= twice the slope of demand curve.

Equation of demand curve>> P-100=-1/5Q

TR=P*Q

MR=dTR/dQ

MR=100-2/5Q

Equation of MC>> MC-40=1/10(Q-150)

MC=Q/10+25

MR=MC

100-2/5Q=Q/10+25
Q=150

P=70

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