A monopoly is considering selling several units of a homogeneous product as a single package. A...
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A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer's demand for the product is {eq}Q_d = 70 - 0.25 P {/eq}, and the marginal cost of production is {eq}\$100 {/eq}.
a. Determine the optimal number of units to put in a package.
b. How much should the firm charge for this package?
Price and Output Decisions for Monopoly
A monopolist maximizes its profit at an output level where MR = MC. At this output level, the price a monopolist charges is what consumers are willing to pay for in the market, which is the price on the demand curve at the output level.
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View this answera. A monopolist chooses to produce where MR=MC to maximize profit.
Given by the demand curve, {eq}Q_d = 70 - 0.25 P {/eq}, then we get...
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What is a Monopoly in Economics? - Definition & Impact on Consumers
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Chapter 7 / Lesson 2
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Understand the meaning of a monopoly in economics and what it does. Also, know the characteristics of a monopoly and the different types of monopolies.
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