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Sergio [31]
3 years ago
6

A monopoly market is characterized by the inverse demand curve P = 1,200 – 40 Q and a constant marginal cost of $200. If the mar

ginal cost of production rises to $400, the profit-maximizing output level _____ units and the price rises by _____.
Business
1 answer:
Sergeeva-Olga [200]3 years ago
4 0

Answer:

The profit maximizing output level declines by 2.5 units and the price rises by $100.

Explanation:

In a monopoly market the inverse demand curve is given as,

P = 1,200 - 40Q

The marginal cost of production of the last unit is $200.

The total revenue is

= Price\times Quantity

= 1,200Q - 40Q^{2}

The marginal revenue of the last unit is

= \frac{d}{dx} TR

= 1,200 - 80Q

At equilibrium the marginal revenue is equal to marginal price,

MR = MC

1,200 - 80Q = 200

80Q = 1,000

Q = 12.5

Putting the value of Q in the inverse demand function,

P = 1,200 - 40\times 12.5

P = $700

Now, if the marginal cost rises to $400,

At equilibrium the marginal revenue is equal to marginal price,

MR = MC

1,200 - 80Q = 400

80Q = 800

Q = 10

Putting the value of Q in the inverse demand function,

P = 1,200 - 40\times 10

P = $800

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Answer:

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Explanation:

Data given

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The computation of rate of return is shown below:-

Using CAPM

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Therefore for computing the rate of return we simply applied the above formula.

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Answer:

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