Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

12. Monopoly

Monopoly Profit on the Graph

Microeconomics

12. Monopoly

Monopoly Profit on the Graph

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Multiple Choice

This pure monopolist:

Charges the highest price it could achieve

Earns only a normal (accounting) profit in the long run

Restricts output to create an insurmountable entry barrier

Restricts output to increase its price and total economic profit

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Verified step by step guidance

Identify the key curves in the graph: Demand (D), Marginal Cost (MC), Average Total Cost (ATC), and Marginal Revenue (MR).

Understand that a monopolist maximizes profit where Marginal Revenue (MR) equals Marginal Cost (MC). This is the point where the monopolist decides the quantity of output to produce.

Locate the intersection of the MR and MC curves on the graph. This intersection determines the profit-maximizing quantity of output for the monopolist.

To find the price the monopolist will charge, extend a vertical line from the profit-maximizing quantity up to the Demand (D) curve. The point where this line intersects the Demand curve indicates the price.

Recognize that by restricting output to the profit-maximizing quantity, the monopolist can charge a higher price than in a competitive market, thereby increasing its total economic profit.