Monopoly

Profit Maximizing Analysis

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

Price Per
Total
Unit
Revenue Total Cost
(Demand)
(TR)
(TC)
$8.00
0.00
10.00
$7.80
7.80
14.00
$7.60
15.20
17.50
$7.40
22.20
20.75
$7.20
28.80
23.80
$7.00
35.00
26.70
$6.80
40.80
29.50
$6.60
46.20
32.25
$6.40
51.20
35.10
$6.20
55.80
38.30
$6.00
60.00
42.70
$5.80
63.80
48.70
$5.60
67.20
57.70

Total
Average Marginal Marginal
Profit Total Cost
Cost Revenue
(TP)
(ATC)
(MC)
(MR)
-10.00
-6.20
14.00
4.00
7.80
-2.30
8.75
3.50
7.40
1.45
6.92
3.25
7.00
5.00
5.95
3.05
6.60
8.30
5.34
2.90
6.20
11.30
4.92
2.80
5.80
13.95
4.61
2.75
5.40
16.10
4.39
2.85
5.00
17.50
4.26
3.20
4.60
17.30
4.27
4.40
4.20
15.10
4.43
6.00
3.80
9.50
4.81
9.00
3.40

Analysis
1. If Marginal Cost were to go any higher it
would exceed Marginal Revenue and would
decrease the amount of profit.
2. The monopolist determines its prices based
off where MR = MC along the demand curve.
3. The monopolist is innefecient because it
charges a greater price than marginal cost and
because total costs are not at a minimum.

Monopoly Profit Determination

Demand Price

Price, Marginal Revenue, and Costs

$16.00
$14.00
$12.00

MC = MR

$10.00
Price Per Unit (Demand)

$8.00

Average Total Cost (ATC)

Marginal Cost (MC)

$6.00

Monopoly Profit

Marginal Revenue (MR)

$4.00
$2.00
$0.00
0

10

11

12

Output

Total Costs / Total Revenue

Revenue Cost Comparison

80.00
70.00
60.00
50.00
40.00

Total Revenue (TR)

30.00

Total Cost (TC)

20.00
10.00
0.00
1

Output

10

11

12

13

Average Total Cost