CA Foundation · Business Economics · Price Determination in Different Markets
A monopolist has the demand function P = 60 - Q and total cost TC = 100 + 10Q. What is its maximum profit?
Maximum profit is ₹525. Setting MR = 60 - 2Q equal to MC = 10 gives output of 25 units and price ₹35. Revenue is ₹875 and total cost is ₹350 including the fixed cost of ₹100, leaving profit of ₹525.
- A₹525Correct
- B₹625
- C₹725
- D₹1,125
Explanation
TR = 60Q - Q², so MR = 60 - 2Q. MC = 10. Setting MR = MC gives 60 - 2Q = 10, so Q = 25. P = 60 - 25 = 35. TR = 35 × 25 = 875. TC = 100 + 250 = 350. Profit = 875 - 350 = 525. The figure 625 ignores the fixed cost of 100.
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