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Total revenue would be $50, total costs would be $25 and profits would be $25. If the monopolist practiced price discrimination he would sell the first unit for $17 the second unit for $14 and so on which is listed in the table below. Total revenue would be $55, his total cost would be $25 and his profit would be $30. [64]
[1] [2] A monopoly occurs when a firm lacks any viable competition and is the sole producer of the industry's product. [1] [2] Because a monopoly faces no competition, it has absolute market power and can set a price above the firm's marginal cost. [1] [2] The monopoly ensures a monopoly price exists when it establishes the quantity of the ...
[28] [29] A firm that is shut down is generating zero revenue and incurring no variable costs. However, the firm still has to pay fixed cost. So the firm's profit equals fixed costs or . [30] An operating firm is generating revenue, incurring variable costs and paying fixed costs.
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The company is able to collect a price based on the average revenue (AR) curve. The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph.
This can be confirmed graphically. Using the diagram illustrating the total cost–total revenue perspective, the firm maximizes profit at the point where the slopes of the total cost line and total revenue line are equal. [4] An increase in fixed cost would cause the total cost curve to shift up rigidly by the amount of the change. [4]
A firm with monopoly power sets a monopoly price that maximizes the monopoly profit. [4] The most profitable price for the monopoly occurs when output level ensures the marginal cost (MC) equals the marginal revenue (MR) associated with the demand curve. [4]