A monopolist faces the following demand function : for in the interval for in the interval for in the interval Now suppose that the monopolist has zero variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of ₹ 50. What is the optimal monopoly price?
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A monopolist faces the following demand function D(P): D(P) = 10 for P in the interval [0, 10] = 20 - P for P in the interval (10, 20) = 0 for P in the interval [20, ∞) Now suppose that the monopolist has zero variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of ₹ 50. What is the optimal monopoly price? (A) 15 (B) 10 (C) 5 (D) There is no monopoly equilibrium
Also written as: A monopolist faces the following demand function D(P): D(P) = 10 for P in the interval [0, 10] = 20 - P for P in the interval (10, 20) = 0 for P in the interval [20, inf) Now suppose that the monopolist has zero variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of ₹ 50. What is the optimal monopoly price?
Monopoly and price discrimination has come up 128 times in 7 exams since 2004.
This question is on Monopoly equilibrium and marginal revenue, part of Monopoly and price discrimination in Microeconomics.
How a monopolist sets price and output where marginal revenue equals marginal cost.
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Question from the JNU SSS 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.