Consider the complying with table v cost and also revenue data for a hypothetical monopolist:
|Quantity||TFC||TVC||TC||AVC||ATC||MC||Price||Total Revenue||Marginal Revenue|
Problem: What space the profit-maximizing output and also price for the over monopolist? What is the benefit at this output? What is the median profit in ~ this output?
Solution: favor the completely competitive firm, a monopolist maximizes profits at the quantity where marginal cost and marginal revenue are equal, or whereby marginal cost comes closest to marginal revenue, as long as marginal cost does no exceed marginal revenue, marginal cost is no falling, and also price exceeds median variable cost.
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Applying the profit-maximizing rule, we conclude the the for sure maximizes profits at
|Quantity||= 600 units|
|Profit (TR-TC)||= $19,200-$15,000 = $4,200|
|Average benefit (TP / Q)||= $7 ($4,200 / 600)|
Video ExplanationFor a video explanation that a syndicate firm’s benefit maximization utilizing a table, you re welcome watch:
Monopoly Profit-Maximization by evaluating a GraphIn a table, we find the profit-maximizing calculation by identify the allude at which marginal cost and also marginal revenue space equal, as long as marginal expense does no exceed marginal revenue, marginal expense is no falling, and also price exceeds average variable cost.
The graph below indicates that at calculation Qpm, marginal price equals marginal revenue in the increase sloping section of the marginal price curve. In ~ this output, the price is Ppm. For a monopolist, the marginal revenue curve and the need (price) curve space different. Therefore, marginal revenue and price at the profit-maximizing output are different. From the MC=MR point, go directly up to the need curve in order to recognize the profit-maximizing price. This price is greater than the firm’s median variable cost, for this reason the agency will not have to shut down.
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The price is also greater than the firm’s average full cost, therefore the company is do an economic (above-normal) profit. Due to the fact that there are barriers to entry right into this industry, the is feasible that the firm can proceed to make economic profits in the lengthy run, as well.
For a video explanation the a monopolist’s profit-maximizing quantity and price utilizing a graph, you re welcome watch: