- Assume that you are managing a monopoly. Your monopoly faces a downward sloping demand curve described by the equation P = 85 - 5Q.
- Further assume that your total cost function is TC = 20 + 5Q.
- You are provided with the information that the MR = 85 - 10Q. (Note that MR refers to marginal revenue.)
- Finally you are given the information that MC = $5. (Note that MC refers to marginal cost.)
Based on this information, answer the following three parts of question 3.
a. What is the level of fixed costs for this monopoly?
b. What is the profit maximizing quantity level for this firm? Show your steps in arriving at the answer.
c. What is the profit maximizing price for this firm? Show your steps in arriving at the answer.