N3

A risk-neutral monopoly must set output before it knows the market price. There is a 50 percent chance the firm's demand curve will be P = 20 - Q and a 50 percent chance it will be P = 40 - Q. The marginal cost of the firm is MC = Q. The profits are maximized in the expected sense when:

a) MC = expect value of price

b) MC < E(MR)

c) expected value of price = E(MR)

d) MC= E(MR)