Question

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. P=200−????, fixed cost = 1,000.

Profit-maximizing output Q =

Profit-maximizing price P = $

Monopolist's profit: $

Answer 1

Given data is

Fixec cost=$1000

P=200

Mc=0

So profit=1000-200

Profit=$800

Answer 2

a. Q=90

b. P =100

C. Profit $9.000

Step-by-step explanation:

A profit maximizing monopolist produces at the point MR = MC

Given: P = 200-Q

TR = PQ = 200Q – Q2

MR = dTR/dQ = 200-2Q

Now set MR = MC

200-2Q = 0

200 = 2Q

Q* = 100

P* = 200-Q = 200-100

P* = $100

Profit = PQ – FC

Profit = (100x100) – 1000

Profit = $9000