This activity $is$ designed $to$ help you understand the functioning $of$ monopolists and how they make profit$-$maximizing choices.

Demand and inverse demand

Drag the point $to$ change the output quantity.

$If$ the market demand $is$

$D(p)=20-1\mathrm{.}00p$

Then the inverse demand $is$ given $by$

$p(q)=20-1\mathrm{.}00q$

$If$ a firm facing this inverse demand wanted $to$ sell $q=8\mathrm{.}00$ units, the highest price $it$ could charge would $bep=$ $$12\mathrm{.}00$ per unit.

Question $1$

$If$ the producer wants $to$ produce $atan$ output level $of4$ units, their revenue will $be$ $$...$

Question $2$

$If$ the producer wants $to$ produce $atan$ output level $of10$ units, their revenue will $be$ $$...$

Question $3$

$If$ the producer wants $to$ produce $atan$ output level $of13$ units, their revenue will $be$ $$...$

Question $4(Multiple$ choices$)$

Which $of$ the following $is$ true based $on$ your answers $to$ the previous questions.

$A.$ The producer should produce $at$ low levels $of$ output since that $is$ where price $is$ highest

$B.As$ output increases, total revenue increases and then decreases, since, eventually, any new revenue gained $by$ decreasing the price $is$ offset $by$ the loss $in$ revenue due $to$ quantity sold.

$C.As$ output increases, total revenue $is$ increasing $as$ higher output implies more sales, leading $to$ a higher revenue.

$D.As$ output increases, total revenue increases and then decreases, since, eventually, any new revenue gained $by$ selling more units $is$ offset $by$ the loss $in$ revenue due $to$ a lower price.

$E.$ The producer will earn the highest revenue when its output $isat$ the highest possible value.