Total

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

Average
Total
Marginal
Costs
Marginal Revenue
(ATC) Cost (MC)
(MR)

Price Per
Total
Unit
Revenue
Total
Total
(Demand)
(TR)
Costs (TC) Profit (TP)
$8.00
$7.80
$7.60
$7.40
$7.20
$7.00
$6.80
$6.60
$6.40
$6.20
$6.00
$5.80
$5.60

0.00
7.80
15.20
22.20
28.80
35.00
40.80
46.20
51.20
55.80
60.00
63.80
67.20

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

-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

0.00
14.00
8.75
6.92
5.95
5.34
4.92
4.61
4.39
4.26
4.27
4.43
4.81

0.00
4.00
3.50
3.25
3.05
2.90
2.80
2.75
2.85
3.20
4.40
6.00
9.00

0.00
7.80
7.40
7.00
6.60
6.20
5.80
5.40
5.00
4.60
4.20
3.80
3.40

Price, Marginal Revenue, and Costs

Monopoly Profit Determination

$16.00
$14.00
$12.00
$10.00
$8.00
$6.00

Monopoly Profit

$4.00
$2.00
$0.00
0

10

11

Output
Price Per Unit (Demand)

Average Total Costs (ATC)

Marginal Cost (MC)

Marginal Revenue (MR)

12

Total Costs/ Toatol Revenue

Revenue-Cost Comparison
80.00

70.00
60.00
50.00
40.00
30.00
20.00
10.00

0.00
0

10

11

Output
Total Revenue (TR)

Total Costs (TC)

1) Monopolies maximize profit where MC = MR. The explanation is the

same as a firm in a perfectly competitive market. Once Marginal costs
equal marginal revenue we are at the point where producing even one
more unit will cause our total profits to decline. If marginal costs surpass
marginal revenue per unit we are cutting into our total profits.
2) Unlike those in perfect competition monopolies actually have a lot of
pricing power. They still don't have all the power if they want to make a
large profit. Monopolies will try to price thier product at the output point
where marginal cost equal their total revenues. This is where they will
maximze their profit. They want to keep their price low enough that
people will want to buy their product while at the same time keeping it
high enough to make an economic profit.
3) Monopolies are inefficient becasue they charge a cost greater than that
of their marginal cost and their average total costs are often times not at
a minimum.

12