Worksheet 61.

1: Monopoly D and MR

After watching Jacob Clifford’s video titled “Micro Unit 4, Question 1--Monopoly Demand and
MR” found at https://www.youtube.com/watch?v=rtwJOu0KWDk, answer the following
questions.

1. Describe the difference between the D and MR curve for perfect competition and for
monopolies. Which of the two are price takers and which are price makers?
For perfect competition, MR = D, but in monopolies, because demand increases as price decreases MR
will always be equal to or lower than D.

2. In Mr. Clifford’s example problem, for the monopolist does P ever equal MR? If so
when?
Yes, only at the beginning other than that Price will always be higher than MR

3. What is price discrimination?

When a firm lets one person buy a different thing from another person

4. Are there other firms that are price makers besides monopolies? If so what are they?

Monopolistic competition, oligopolies

5. In Mr. Clifford’s example, if this monopolist wants to sell more than 3 units, what does
he have to do?

lower the price or else people won't buy it

© 2015, BFW/ Worth Publishers Section 11

Krugman’s Economics for AP®, 2e Teacher’s Resource Materials
 Worksheet 61.2: Monopoly Profit

Analyze the monopoly graph given below.

Determine the following:

1. The monopolist’s optimal point of output

2. The perfectly competitive firm’s price

3. The monopolist’s price

4. The perfectly competitive firm’s profit

5. The monopolist’s profit

6. Is there allocative efficiency for the monopolistic firm? Explain.

7. Is there allocative efficiency for the perfectly competitive firm? Explain.

© 2015, BFW/ Worth Publishers Section 11

Krugman’s Economics for AP®, 2e Teacher’s Resource Materials
 Worksheet 61.3: Drawing a Monopoly Graph
Test It

1. Draw a correctly labeled monopoly graph for a firm earning an economic profit. Show
the profit-maximizing level of output and price and shade the area of economic profit for
the monopolist.

2. Why is the MR below the D curve in a monopoly?

Because of the law of demand it means that price drops when demand increases and money is lost
when price is dropped
3. How is the profit-maximizing level of output determined in the monopoly?
The output is where MR=MC

4. How is the price determined in the monopoly?

Output where MR = MC goes up to the demand curve.

5. How is the economic profit for the monopolist determined?

(P at the output where MR = MC on the demand curve times the output at MR = MC) - (the output
where MR = MC on ATC times the output at MR = MC)

© 2015, BFW/ Worth Publishers Section 11

Krugman’s Economics for AP®, 2e Teacher’s Resource Materials
 Worksheet 61.4: Monopoly Graph Review

After watching Jacob Clifford’s video titled “Micro 4.2 Monopoly Graph Review and Practice”
found at https://www.youtube.com/watch?v=ZiuBWSFlfoU, answer the following questions
based on this graph. Numbers in parentheses give a hint as to the number of letters needed for
correct answer. Remember to start from the origin (o) if necessary.

. P k

MC ATC
c
d

e b
i

g h

0 f a Q

MR
h
______________ 1. Point where MR=MC (1)
fc
______________ 2. Profit-maximizing level of output for monopoly (2)
dc
______________ 3. Price at profit-maximizing level for monopoly (2)
profit
______________ 4. Is the firm earning an economic profit or loss?
dcof
______________ 5. Rectangle of revenue for monopoly (4)
dcei
______________ 6. Rectangle of profit or loss (4)
dc
______________ 7. Unit cost at profit-maximizing output (2)
eiof
______________ 8. Rectangle of total cost (4)
eb
______________ 9. Price at profit-maximizing level for purely competitive firm (2)
ab
______________ 10. Profit-maximizing level of output for pure competition (2)

© 2015, BFW/ Worth Publishers Section 11

Krugman’s Economics for AP®, 2e Teacher’s Resource Materials