Monday, August 15, 2011
How do you find the profit maximizing price and output of a monopoly without a given price or MR?
If the demand curve is Q(p)=10-p and the marginal cost is constant at 4, what is the profit-maximizing monopoly price and output? The answer is a price of $7 and an output of 3 (answer in back of book). I've looked all over the net, I can't find the solution to this specific question. Every solution I come across deal with questions that give way more information than what I have. I know the equation for demand elasticity. I also know that profit is maximized when MR=MC. Still, I'm not able to connect the dots for this one. Can anyone tell me HOW to arrive at p=7, q=3? Thanks
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