Consider the adhering to table through cost and revenue data for a hypothetical monopolist:

 Quantity TFC TVC TC AVC ATC MC Price Total Revenue Marginal Revenue 0 5,000 0 5,000 – – – 38 0 – 100 5,000 3,000 8,000 30 80 30 37 3,700 37 200 5,000 5,000 10,000 25 50 20 36 7,200 35 300 5,000 6,000 11,000 20 36.67 10 35 10,500 33 400 5,000 6,800 11,800 17 29.50 8 34 13,600 31 500 5,000 8,000 13,000 16 26 12 33 16,500 29 600 5,000 10,000 15,000 16.67 25 20 32 19,200 27 700 5,000 13,000 18,000 18.57 25.71 30 31 21,700 25 800 5,000 16,500 21,500 20.63 26.88 35 30 24,000 23 900 5,000 22,000 27,000 24.44 30 55 29 26,100 21

Problem: What are the profit-maximizing output and price because that the over monopolist? What is the profit at this output? What is the typical profit in ~ this output?

Solution: like the purely competitive firm, a monopolist maximizes profits at the quantity where marginal cost and marginal revenue space equal, or wherein marginal price comes closest to marginal revenue, as lengthy as marginal expense does not exceed marginal revenue, marginal cost is no falling, and price exceeds average variable cost.

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Applying the profit-maximizing rule, us conclude the the certain maximizes earnings at

 Quantity = 600 units Price = \$32 Profit (TR-TC) = \$19,200-\$15,000 = \$4,200 Average benefit (TP / Q) = \$7 (\$4,200 / 600)

Video ExplanationFor a video clip explanation of a monopoly firm’s benefit maximization making use of a table, you re welcome watch:

Monopoly Profit-Maximization by analyzing a GraphIn a table, we find the profit-maximizing calculation by identifying the point at i m sorry marginal cost and also marginal revenue are equal, as lengthy as marginal expense does not exceed marginal revenue, marginal price is not falling, and also price exceeds median variable cost.

The graph below indicates that at calculation Qpm, marginal cost equals marginal revenue in the increase sloping part of the marginal cost curve. At this output, the price is Ppm. For a monopolist, the marginal revenue curve and the need (price) curve space different. Therefore, marginal revenue and also price at the profit-maximizing output are different. Native the MC=MR point, go right up to the need curve in stimulate to recognize the profit-maximizing price. This price is better than the firm’s mean variable cost, so the agency will not have to shut down. 