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You are the manager of a monopoly and your cost function is C(Q) =2Q. You

need to determine the optimal level of output for your firm, but the demand for your firm's product will depend on whether or not a new tax law is passed. If passed, the new tax law will reduce income taxes and increase consumers' disposable income. Politicians have determined that there is a 70% chance that the tax law will be passed and a 30% chance that will not. If the tax law is passed, the demand for your firm's product will be: 
 Q = 100 - 2P
If the tax law is not passed, the demand for your firm's product will be:
 Q = 75 - 3P
How much output should you produce to maximize expected profits?


What is the expected price for your product? (Round to one decimal place)


What are your anticipated profits? (Round to the nearest whole number)

Step-by-step answer

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Subject: Business, Economics

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