Answer to Question #70201 in Microeconomics for Mida
A monopolist faces a demand curve Q = A – P and has a cost function C(Q) = cQ. Derive
the optimal monopoly price and its total profit.
MC = C’(Q) = (CQ)’ = C.
Q=1/2(A-C) – optimal quantity.
P=A-1/2(A- C) = A-1/2A+1/2C=1/2(A+C)
Total profit is:
TP=(1/2A+1/2C-C)*(1/2A- 1/2C)= (1/2A-1/2C)^2