Sub: Economics Topic: Micro Economics

Question:

Optimum level of production and price level for monopolies

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A monopoly is considering selling several units of homogeneous product as a single package. A

typical consumer’s demand for the product is Qd = 200 – 2P, and the marginal cost of
production is $40.

a. Determine the optimal number of units to put in a package.

b. How much should the firm charge for this package?

Solution:

Given Information are:

Qd = 200 – 2p

MC = 40

Therefore

Qd = 200 – 2p

Price (p) = 100 – (Q/2)

Total Revenue = 100Q – (Q^2/2)

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 Sub: Economics Topic: Micro Economics

Marginal Revenue = 100 – Q

MR = MC (Monopoly condition)

100 – Q = 40

Optimum level of Quantity is(Q) = 60 And Price (P) is = 70

** End of the Solution **

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*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
lieu of your academic submissions for grades.