Posted by Carol on .
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?
D. None of the statements associated with this question are correct
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