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Monopoly – short run equilibrium

MC = MR

Slope of the MC > slope of the MR at the point of intersection

Example

Q = 50 – 0.5P TC = 50 + 40Q What is TR? MR?MC? Profit maximization out put?

TR Demand curve is solved for P P = 100 – 2Q TR = PQ TR = Q(100 – 2Q) TR = 100Q – 2Q 2

MR

MR = dR = 100 – 4Q

dq

MC

TC = 50 + 40Q

MC = dTC = 40

dq

Profit maximization output? MR =MC 100 – 4Q = 40 Q =15

What is the price at which profits are maximizing? P = 100 – 2Q P = 100 – 2* 15 = 70

What is the total profit when profits are maximizing? Profits = TR –TC = 1050 -650 = 400