The following figure shows the revenue and cost curves of a monopolist. Figure 10.3
D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
-Consider the monopolist described in Figure 10.3.The firm can maximize profit by producing:

Question

The following figure shows the revenue and cost curves of a monopolist. Figure 10.3

D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
-Consider the monopolist described in Figure 10.3.The firm can maximize profit by producing:

Quizplus · Accepted Answer

The monopolist's profit-maximizing output is at the quantity where marginal revenue equals marginal cost. In this case, the marginal cost curve intersects the marginal revenue curve at QS1U1B12. At this output level, the monopolist can charge a price of P1 and earn total profit equal to the shaded area between the average total cost curve and the demand curve at that quantity. This is the highest level of profit the monopolist can achieve. Producing more or fewer units would result in lower profits for the firm.

The Following Figure Shows the Revenue and Cost Curves of a Monopolist