Question: Marion the monopolist faces the following demand function: Q = 22,000 - 8P. She faces the following cost function: TC = 5,000,000 + 140Q.
- Calculate the price and quantity at which profits are a maximum.
- What are the maximum profits?
- Graph the demand, marginal revenue, marginal cost and average cost functions.
- Shade in the area that represents the profits of the firm.
Now assume that regulators have decided to regulate Marion so that price = average cost. What price and quantity does this correspond to?