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

question 117

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 = 40 − Q and a 50 percent chance it will be P = 60 − Q.The marginal cost of the firm is MC = 3Q.The expected profit-maximizing price is:

• A) $10.
• B) $20.
• C) $30.
• D) $40.

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