Monopoly Profit Maximizing Analysis

Total Total Total Output Price Per Unit Revenue Total Profits Units (Demand) (TR) Costs (TC) (TP) 0 $8.00 0.00 10.00 ($10.00) 1 $7.80 7.80 14.00 ($6.20) 2 $7.60 15.20 17.50 ($2.30) 3 $7.40 22.20 20.75 $1.45 4 $7.20 28.80 23.80 $5.00 5 $7.00 35.00 26.70 $8.30 6 $6.80 40.80 29.50 $11.30 7 $6.60 46.20 32.25 $13.95 8 $6.40 51.20 35.10 $16.10 9 $6.20 55.80 38.30 $17.50 10 $6.00 60.00 42.70 $17.30 11 $5.80 63.80 48.70 $15.10 12 $5.60 67.20 57.70 $9.50 Average Total Costs (ATC) 0.00 14.00 8.75 6.92 5.95 5.34 4.92 4.61 4.39 4.26 4.27 4.43 4.81 Marginal Marginal Costs Revenue( (MC) MR) --4.00 7.80 3.50 7.40 3.25 7.00 3.05 6.60 2.90 6.20 2.80 5.80 2.75 5.40 2.85 5.00 3.20 4.60 4.40 4.20 6.00 3.80 9.00 3.40

1. Explain in your

* The reason behi generated from th

2. Explain how th

* The monopolist he charges the pri 3. A monopoly is

* It's considered a marginal cost of p used elsewhere. * Monopolists als

Monopoly Profit Determination

$16.00 $14.00

Price, Marginal Revenue, and Costs

$12.00

$10.00

MC
Price Per Unit (Demand) Average Total Costs (ATC)

$8.00

$6.00

Marginal Costs (MC)

Monopoly Profit
$4.00

Marginal Revenue(MR)

$2.00

MR

$0.00 1 2 3 4 5 6 7 8 9 10 11 12

Output

10

11

12

Output

Revenue - Cost Comparison

80.00 70.00

TR TC

Total Costs / Total Revenue

60.00 50.00 40.00

Total Revenue (TR) 30.00 20.00 10.00 0.00 1 2 3 4 5 6 7 8 9 10 11 12 13 Total Costs (TC)

Output

1. Explain in your own words why MC=MR is a profit maximizing production level for the Monopoly * The reason behind it is simple, a company should produce one more output until the revenue that can be generated from that output equals the cost of making that last output.

2. Explain how the monopolist determines where to price his product * The monopolist will produce at a quatity where marginal cost equals marginal revenue. For that quantity he charges the price that the quatity is demanded at. 3. A monopoly is considered an inefficient use of resources for what two reasons? * It's considered an inefficient use of resources because the consumer pays a price that exceeds the marginal cost of production and too few resources are used in he monopolist industry and too many are used elsewhere. * Monopolists also do not produce where costs are at their lowest.

Demand Price Juncture

Price Per Unit (Demand) Average Total Costs (ATC) Marginal Costs (MC) Marginal Revenue(MR)

Marginal Costs = Marginal Revenues

Average Total Costs

Total Revenue (TR) Total Costs (TC)

e that can be

hat quantity