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A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P = 38 - Q.
What are the profits of the monopoly in equilibrium?
A. $225
B. $120
C. $345
D. None of the statements associated with this question are correct

  • Economics -

    Is equilibrium defined as the maximum profit condition? You can have "equilbrium" at any price.

    Is Q the quantity sold and P the price?

    If so, profit is
    Y = QP - 8Q = Q(P - 8) = Q (30 - Q)

    maximum profit is abtained when dY/dQ = 0
    30 = 2Q
    Q = 15
    Profit = 15 x 15 = $225

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