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

question 67

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.The expected profit-maximizing price is:

• A) $5.
• B) $10.
• C) $15.
• D) $20.

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