Hence, the profit-maximizing condition is met. You can verify that at this output MR = MC = 64.17. Let’s consider Braavos, Inc., a monopolist whose demand is given by the following equation: The profit-maximizing quantity and price correspond to the point at which the marginal revenue and marginal cost curves of the monopolist intersects. it decreases initially but ultimately starts rising due to diminishing returns to scale. Marginal cost curve of the monopolist is typically U-shaped, i.e. Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a _ (monopoly/ competitive market), and the quantity is higher under a _ (monopoly/ competitive market).A monopoly can maximize its profit by producing at an output level at which its marginal revenue is equal to its marginal cost.Ī monopolist faces a downward-sloping demand curve which means that he must reduce its price in order to sell more units. In the following table, enter the price and quantity that would arise in a competitive market then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. (7B)Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. (4) Ana charges a lower price in the market with a relatively _ price elasticity of demand. Nondiscriminatory _ (total tickets + price)ĭiscriminatory_(tickets new price) + (tickets new price) Follow MR up the demand curve until it touches. At these prices, she will sell a total quantity of _ admission tickets per day. To maximize revenue, Ana should charge _ per admission in Market A and _ per admission in Market B. (2)Imagine now that Ana decides to charge a different price in each market. Intersect of price line and demand curve meet. (1) Imagine that at first, Ana charges the same price of $4 per admission in both markets so that the total number of admissions demanded is -_ tickets. Ana's marginal cost of providing admission tickets is zero. The following graphs show daily demand (DD) curves and marginal revenue (MRMR) curves for the two markets. The event attracts scientists and tourists, and Ana decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). One day, a giant meteorite falls on her property, making a large crater. So there is no supply curve for monopoly. A monopoly firm is a price-maker, not a price-taker Q does not depend on P rather, Q and P are jointly determined by MC, MR, and the demand curve. Price x Quantity Average Total Cost x Quantity ATC (total profit).

> ATC Positive Profit Monopoly making a profit < ATC LOSS ATC in Total Monopoly making a loss ATC. Total cost is AC x Q m, but total revenue is only P m x Q m, so TC>TR. Ana owns a plot of land in the desert that isn't worth much. A Monopoly Does Not Have an S Curve A competitive firm takes P as given has a supply curve that shows how its Q depends on P. In the right-hand graph, the firm’s average cost curve is greater than price, and it is losing money.

Monopoly graph