A Risk Neutral Monopoly Must Set Output Before It Knows

question 83

Multiple Choice

A risk neutral monopoly must set output before it knows for sure the market price.There is a 50% chance the firm's demand curve will be P = 20 - Q and a 50% chance it will be P = 40 - Q.The marginal cost of the firm is MC = Q.The profits are maximized in the expected sense when:

• A)Expected value of price = E(MR).
• B)MC = Expected value of price.
• C)MC < E(MR).
• D)MC = E(MR).

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