Monopoly

Introduction

Example of Natural Monopoly

Demand Curves of Monopoly and Competition

Exercise

Exercise-1 on Monopoly's Revenue

Check your answers here: Solution-1 to the Exercise on Monopoly's Revenue



MR Curves of Virgin Oil Star Firm

As per the example above, the MR curves are shown in the figure below.
virgin-oil-star.jpg

So, whenever the production (Q) is increased the revenues also increase (output effect)
But if price decreases then revenues also decrease (price effect).
The figure shows that MR could even be negative if the price effect exceeds the output effect.

Profit-Maximization

The profit-maximizing Q is where MR = MC.
Identify P from the demand curve at this Q.
profit-maximizing.jpg


The monopolist's profit is shown below as with a competitive firm: The monopolist's profit = (P − ATC) × Q
profit-maximizing-2.jpg


For more details, please contact me here.
Date of last modification: 2019