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Part III: Market Structures and the Decision-Making Environment Because the total quantity of output the monopolist sells, q, is produced in some combination from factories A and B, the quantities produced in each factory added together must equal the quantity sold by the monopolist.
4. Substitute qA = –1,000 + 2qB from Step 1 for qA in Step 3’s equation.
5. Solve for qB.
6. Using the equation from Step 1, solve for qA.
7. Solve for q, the total quantity of output the monopolist sells.
8. Solve for P, the price the monopolist establishes.
P is determined by using the demand equation I give at the beginning of the example.
9. The monopolist’s total profit is determined by subtracting the total cost of producing the given output in each factory from total revenue.
So, the monopolist’s total profit is $96,500. Knowing how to minimize cost when producing in two or more facilities is even better than collecting $200 when you pass “Go” in the board game Monopoly.
