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    Micro 2010

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    api-240401313
    1) The document analyzes the profit maximization output level for a monopoly by comparing marginal revenue, marginal cost, average total cost, and demand price across different levels of output. 2) It finds that a monopoly will produce where marginal cost equals marginal revenue to maximize profits, although it can charge a price above this level according to the demand curve. 3) Producing less than the level where marginal cost equals marginal revenue makes a monopoly inefficient since it leads to excess capacity in resources.

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    Micro 2010

    Uploaded by

    api-240401313
    19 views1 page
    1) The document analyzes the profit maximization output level for a monopoly by comparing marginal revenue, marginal cost, average total cost, and demand price across different levels of output. 2) It finds that a monopoly will produce where marginal cost equals marginal revenue to maximize profits, although it can charge a price above this level according to the demand curve. 3) Producing less than the level where marginal cost equals marginal revenue makes a monopoly inefficient since it leads to excess capacity in resources.

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    micro 2010

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    1) The document analyzes the profit maximization output level for a monopoly by comparing marginal revenue, marginal cost, average total cost, and demand price across different levels of output. 2) It finds that a monopoly will produce where marginal cost equals marginal revenue to maximize profits, although it can charge a price above this level according to the demand curve. 3) Producing less than the level where marginal cost equals marginal revenue makes a monopoly inefficient since it leads to excess capacity in resources.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    19 views1 page

    Micro 2010

    Uploaded by

    api-240401313
    1) The document analyzes the profit maximization output level for a monopoly by comparing marginal revenue, marginal cost, average total cost, and demand price across different levels of output. 2) It finds that a monopoly will produce where marginal cost equals marginal revenue to maximize profits, although it can charge a price above this level according to the demand curve. 3) Producing less than the level where marginal cost equals marginal revenue makes a monopoly inefficient since it leads to excess capacity in resources.

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    of 1

    Total

    Output
    Units
    0
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10
    11
    12

    Price Per
    Total
    Unit
    Revenue
    Total
    Total
    (Demand)
    (TR)
    Costs (TC) Profit (TP)
    $8.00
    0.00
    10.00
    -10.00
    $7.80
    7.80
    14.00
    -6.20
    $7.60
    15.20
    17.50
    -2.30
    $7.40
    22.20
    20.75
    1.45
    $7.20
    28.80
    23.80
    5.00
    $7.00
    35.00
    26.70
    8.30
    $6.80
    40.80
    29.50
    11.30
    $6.60
    46.20
    32.25
    13.95
    $6.40
    51.20
    35.10
    16.10
    $6.20
    55.80
    38.30
    17.50
    $6.00
    60.00
    42.70
    17.30
    $5.80
    63.80
    48.70
    15.10
    $5.60
    67.20
    57.70
    9.50

    Average
    Total
    Marginal
    Costs
    Marginal Revenue
    (ATC) Cost (MC)
    (MR)
    -14.00
    4.00
    7.80
    8.75
    3.50
    7.40
    6.92
    3.25
    7.00
    5.95
    3.05
    6.60
    5.34
    2.90
    6.20
    4.92
    2.80
    5.80
    4.61
    2.75
    5.40
    4.39
    2.85
    5.00
    4.26
    3.20
    4.60
    4.27
    4.40
    4.20
    4.43
    6.00
    3.80
    4.81
    9.00
    3.40

    Profitability Analysis-Monopoly
    1.) Where Marginal Cost=Marginal Revenue is at profit maximization level. This
    point is where the cost has the smallest change vs. revenue when producing one more
    unit , this is similar to Perfect Competition.
    2.) A monopolistic firm will set its price along the Price Demand Curve where
    Marginal Cost=Marginal Revenue. The selling price is higher than at the point at
    which Marginal Cost=Marginal Revenue . Because of this monopolistic firms
    doesn't have to sell as high a volume to generate a profits.
    3.) The reasons monopolies are considered ineffecient in the use of resources are
    because they charge a price higher than Marginal Cost and they use fewer resources
    causing a surplus of those resources.

    Revenue-Cost Comparison

    Monopoly Profit Determination


    80.00

    $16.00

    70.00

    Demand Price

    $12.00

    $10.00

    MC

    $8.00

    Average Total
    Costs

    $6.00

    60.00
    Total Costs/Total Revenues

    PRICE, MARGINAL REVENUE, AND COSTS

    $14.00

    Total
    Revenue
    (TR)

    50.00
    40.00

    Total Costs
    (TC)

    30.00
    20.00

    Monopoly Profit
    $4.00

    10.00

    MR
    0.00

    $2.00

    1
    $0.00
    1

    10

    11

    12

    13

    OUTPUT
    Price Per Unit (Demand)

    Average Total Costs (ATC)

    Marginal Cost (MC)

    Marginal Revenue (MR)

    10 11 12 13

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