A Risk-Neutral Monopoly Must Set Output Before It Knows the Market

question 63

Multiple Choice

A risk-neutral monopoly must set output before it knows the market price.There is a 50 percent chance the firm's demand curve will be P = 20 − Q and a 50 percent chance it will be P = 40 − Q.The marginal cost of the firm is MC = Q.What is the expression for the expected marginal revenue function?

• A) E(MR) = 20 − 2Q
• B) E(MR) = 30 − 2Q
• C) E(MR) = 40 − 2Q
• D) E(MR) = 50 − 2Q

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