Homework Help: Economics (Monopoly Pricing)

Posted by Nihl on Friday, August 22, 2008 at 1:10am.

A monopolist produces a product whose demand price and production costs
vary with quality s and quantity q according to

P (s; q) = s (1 - q)
C (s; q) = s^2 q [s-squared multiplied by q]

Calculate the price and quality levels that a monopolist would choose, and the
corresponding quantity sold.

Economics (Monopoly Pricing) - economyst, Friday, August 22, 2008 at 1:39pm
A monopolist will produce where marginal cost = marginal revenue.
Total revenue is P*Q = s(1-Q)*Q = sQ - sQ^2
Total cost is s^2Q
Take the first derivitive (with respect to Q):
MR = s - 2sQ
MC = s^2
Take it from here, Solve for Q.

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