SCENARIO: a MONOPOLIST A Monopolist Faces a Demand Curve Given by P =

question 69

Multiple Choice

SCENARIO: A MONOPOLIST
A monopolist faces a demand curve given by P = 20 - Q and has total
Costs given by TC = Q2.By using a bit of calculus, you should be able
To determine that the firm's marginal revenue is MR = 20 - 2Q and its
Marginal cost is MC = 2Q.
Reference: Ref 9­1
(Scenario: A Monopolist) If the firm's profit­maximizing output level is
5 and its profit­ maximizing price is $15, what are its monopoly profits
At this price and quantity?

• A)$25
• B)$50
• C)$75
• D)$100

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Definitions:

Market Price

The marketplace value at this time for an asset or service.

Underwriting Fee

A fee charged by underwriters for assessing, guaranteeing, and distributing a new issue of securities to the public.

Common Stock

A type of ownership in a corporation that grants holders voting rights and a share in the company’s profits via dividends.

Rights Offering

Rights offering is a financial opportunity provided to existing shareholders to purchase additional shares directly from the company at a predetermined price, usually lower than the market price, before the shares are offered to the public.