Consider a monopolist with the following cost function: C(Q) = 10Q , and a corresponding marginal cost of: MC (Q) = 10. The market demand is: Q= 40-2P, which gives a marginal revenue of: MR(Q) = 20-Q.
a) Write out the firm's inverse demand curve.
b) Draw the (inverse) demand curve, the marginal revenue curve, and the marginal cost curves on a graph.
c) Solve for the monopolist's profit-maximizing level of output, Q*, and the resulting price,P* . Indicating the values on the graph
d) If this were a competitive market, how much output would the firm produce? Whatprice would the firm charge? Indicate these values on the graph.