Sacoya Pedersen

ePortfolio

Monopoly Profit Maximizing Analysis

Monopoly (part 2)
Total
Output
Units
0
1
2
3
4
5
6
7
8
9
10
11
12

Price Per
Total
Unit
Revenue
(Demand)
(TR)
$8.00
0.00
$7.80
7.80
$7.60
15.20
$7.40
22.20
$7.20
28.80
$7.00
35.00
$6.80
40.80
$6.60
46.20
$6.40
51.20
$6.20
55.80
$6.00
60.00
$5.80
63.80
$5.60
67.20

Total
Costs
(TC)
10.00
14.00
17.50
20.75
23.80
26.70
29.50
32.25
35.10
38.30
42.70
48.70
57.70

Total
Profit
(TP)
-10.00
-6.20
-2.30
1.45
5.00
8.30
11.30
13.95
16.10
17.50
17.30
15.10
9.50

Average
Total
Marginal Marginal
Costs
Cost
Revenue
(ATC)
(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:
1. It is profit maximizing because
it's the output where the market
demand and the production cost meet.
2. The monopolist determines the price
at where the demand is for the certain
product and based on how much it costs
to produce. Since they are the only
company, they have the option to chose
their ownpricing based on the marginal
revenue.
3. Monopolies do not efficiently allocate
resources. Because of the negative
market demand curve, there's a
different between price and
marginal cost.

$16.00

Monopoly Profit Determination

$14.00

Demand Price

$12.00

MC
$10.00

MC = MR

$8.00

Price, Marginal Revenue, and Costs

Monopoly Profit

$6.00

MC

Average
Total Costs

$4.00

MR

$2.00

Price Per Unit (Demand)

Average Total Costs (ATC)

$0.00

Marginal Cost (MC)

1

10

11

12

Output

Marginal Revenue (MR)

80.00

Revenue-Cost Comparison

70.00
60.00
50.00
40.00

Total Costs/Total Revenue

30.00
20.00
10.00
0.00
1

Total Revenue (TR)

Output
Total Costs (TC)

10

11

12

13