CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market
A monopolist faces the demand curve P = 100 - 2Q. At what output is total revenue maximised?
Total revenue is maximised at an output of 25 units. With P = 100 - 2Q, marginal revenue is 100 - 4Q, which equals zero at Q = 25. Output of 50 is where price falls to zero, so revenue there is nil.
- A50
- B25Correct
- C20
- D40
Explanation
TR = 100Q - 2Q². MR = 100 - 4Q. Setting MR = 0 gives Q = 25. Check: TR at 25 = 2500 - 1250 = 1250, higher than at 20 (2000-800=1200) or 40 (4000-3200=800). Q = 50 is where price is zero, not where revenue peaks.
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