A Monopolist Faces the Inverse Demand Function Described by P

question 9

Multiple Choice

A monopolist faces the inverse demand function described by p = 50 - 4q, where q is output.The monopolist has no fixed cost and his marginal cost is $5 at all levels of output.Which of the following expresses the monopolist's profits as a function of his output?

• A)50 - 4q - 5
• B)50 - 8q
• C)45q - 4q²
• D)50q - 4q² - 5
• E)None of the above.

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Definitions:

Operating Income

Income generated from regular business operations, excluding expenses like interest and taxes.

Margin of Safety

The difference between actual sales and the break-even point, used to assess the risk of loss from declining sales.

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the amount of goods produced or the volume of sales, including labor and materials.