Short run Equilibrium of Monopoly – Zero cost

Profit of the
Monopoly with Zero cost
is
¦ = TR –TC = TR –0=TR

Under this market ¦Profit = TR –TC = TR –0=TR

Since TC is zero maximum profit is the total revenue.
So profit reaches maximum when TR reaches maximum
Short run Equilibrium of Monopoly – Zero cost

Profit of the
TR,AR,MR Monopoly with Zero cost
is
¦ = TR –TC = TR –0=TR

TR

P=5 a

AR

Q =10
O
MR Quantity
Short run Equilibrium of Monopoly –with Positive costs

TR –TC approach

A firm reaches equilibrium when profit is

maximum. Π

Under this approach, a monopoly firm reaches

equilibrium when total revenue Is higher than total
cost and the difference between the two is
maximum.
Short run Equilibrium of Monopoly –with Positive costs

b TC
TR, TC, ¦

Profit TR

a d TR –TC approach
e a
Profit AR

q1 q q2
O π
MR Quantity
Short run Equilibrium of Monopoly – with positive costs

MR – MC approach

Under this approach a monopoly firm attains

equilibrium when two conditions are fulfil led

1. MR = MC

2.MC curve should cut MR curve from below

Short run Equilibrium of Monopoly – with positive costs

MC AC
MR,MC,AR,MR

MR – MC approach
R
P
Maximum Profit
of the Monopoly with
T S positive cost isTPRS,
the shaded area

E
AR

q Quantity
O
MR