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To calculate total revenue for a monopolist, start with the demand curve perceived by the monopolist. [link] shows quantities along the demand curve and the price at each quantity demanded, and then calculates total revenue by multiplying price times quantity at each level of output. (In this example, the output is given as 1, 2, 3, 4, and so on, for the sake of simplicity. If you prefer a dash of greater realism, you can imagine that these output levels and the corresponding prices are measured per 1,000 or 10,000 pills.) As the figure illustrates, total revenue for a monopolist rises, flattens out, and then falls. In this example, total revenue is highest at a quantity of 6 or 7.

Clearly, the total revenue for a monopolist is not a straight upward-sloping line, in the way that total revenue was for a perfectly competitive firm. The different total revenue pattern for a monopolist occurs because the quantity that a monopolist chooses to produce affects the market price, which was not true for a perfectly competitive firm. If the monopolist charges a very high price, then quantity demanded drops, and so total revenue is very low. If the monopolist charges a very low price, then, even if quantity demanded is very high, total revenue will not add up to much. At some intermediate level, total revenue will be highest.

However, the monopolist is not seeking to maximize revenue, but instead to earn the highest possible profit. Profits are calculated in the final row of the table. In the HealthPill example in [link] , the highest profit will occur at the quantity where total revenue is the farthest above total cost. Of the choices given in the table, the highest profits occur at an output of 4, where profit is 800.

Marginal revenue and marginal cost for a monopolist

In the real world, a monopolist often does not have enough information to analyze its entire total revenues or total costs curves; after all, the firm does not know exactly what would happen if it were to alter production dramatically. But a monopolist often has fairly reliable information about how changing output by small or moderate amounts will affect its marginal revenues and marginal costs, because it has had experience with such changes over time and because modest changes are easier to extrapolate from current experience. A monopolist can use information on marginal revenue    and marginal cost    to seek out the profit-maximizing combination of quantity and price.

The first four columns of [link] use the numbers on total cost from the HealthPill example in the previous exhibit and calculate marginal cost and average cost. This monopoly faces a typical upward-sloping marginal cost curve, as shown in [link] . The second four columns of [link] use the total revenue information from the previous exhibit and calculate marginal revenue.

Notice that marginal revenue is zero at a quantity of 7, and turns negative at quantities higher than 7. It may seem counterintuitive that marginal revenue could ever be zero or negative: after all, does an increase in quantity sold not always mean more revenue? For a perfect competitor, each additional unit sold brought a positive marginal revenue, because marginal revenue was equal to the given market price. But a monopolist can sell a larger quantity and see a decline in total revenue . When a monopolist increases sales by one unit, it gains some marginal revenue from selling that extra unit, but also loses some marginal revenue because every other unit must now be sold at a lower price. As the quantity sold becomes higher, the drop in price affects a greater quantity of sales, eventually causing a situation where more sales cause marginal revenue to be negative.

Questions & Answers

when give the production of bread and pizza. where by bread produces 10 units and pizza 5 units. how do you calculate for the opportunity cost for bread and pizza
Jennifer Reply
6. The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The following table gives production per month for each worker in each country. a. Which country has an absolute advantage in the product
Bablu Reply
6. The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The following table gives production per month for each worker in each country. a. Which country has an absolute advantage in the producti
Bablu
Bablu XD
Neil
Buddy
Neil
We need to know the values to help
Neil
BASKETS OF FRUIT BOARD FEET OF TIMBER Figistan workers 10 5 Blah workers 30 10 Productivity of one worker for one month
Bablu
basket of fruit |basket of timber Figistan workers 10 5 Blah workers 30 10
Bablu
a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber? b. Which country has a comparative advantage in the produc- tion of fruit? of timber? c. Sketch the ppf’s for both countries. d. Assuming no trading betwe
Bablu
Neil rawat
The
Hy neil
shaikh
please
The
please help
The
bablu
The
where the table
Souley
my own idea is that we should divide the number of baskets of fruits and timber by labour force
The
Is it true. can somebody correct me
The
No not true
Neil
Absolute Advantage is determined by the numbers
Neil
You can't just divide it or something
Neil
For example, US makes 8 Cars and 6 Fish Canada makes 2 cars 3 fish US has absolute advantage in this scenario
Neil
Rawat thank you
The
Neil Rawat but a country is said to have absolute advantage over another country when it spends less time producing a commodity
The
For example, 8 cars are produced in one hour. how can we calculate the amount of time for producing one car
The
Ruwat
The
Neil Rawat*
The
There are two types of Questions
Neil
Input and Output. The one that you just put and Bablu asked "Produced in one hour" or "in one month" is Input. Time is a resource. If it said this is just how much they produce, then it's output.
Neil
Shaikh, correct me if I'm wrong and Bablu I'll try to do the problem by 7:30 EST
Neil
Dude Bablu I think there's something wrong either with the question or the way you set that problem up
Neil
Cuz both countries can't specialize in both things
Neil
where is the following table?
ian
Figistan workers 10.........5 Blah Workers 30.............. 10
Neil
i don.t understand plz explain esaily
Saifullah Reply
hello . you mean about assignments help ?
Nhamo
which 1u don't understand
ubong
marginal cost for what
Xasan
definition of economics
Abdal
Marginal cost is the additional increase in quantity produced as a result of increasing total cost
The
MC=dTC/dQ i.e change in total cost as a result of change in quantity produced
The
hello
Soga
hello
Abdal
What happens to the quantity of dollars when the demand for it increases and supply decreases? Does the quantity or volume remain the same?
Anamaya
hello
Bablu
can i ask one question
Bablu
yes
Abdal
yes
Soga
price of dollars will increase
Harsh
what are the principles of economics
Gajendra Reply
Economics is a social science that studies how people satisfy unlimited wants with scarce resources. It involves the analysis of choice and trade through the use of intuitive graphs and mathematical elements. The discipline is divided into two sections: microeconomics (micro) and macroeconomics(macr
Zain
micro and macro principles
Souley
I want to know about microeconomics principles
Gajendra
micro study economics partly eg hw mankind's makes decisions
Souley
explain clearly
Gajendra
it focuses on the actions of Individual agent within an economy like households,business etc
Souley
I understand
Gajendra
good
Souley
hellow guys
Paul
hi
Souley
hi
Gajendra
Hi
Souley
how are you guys doing
The
Helloooooo
Steven
Hi
Souley
Economics is difficult
The
yes, you can say but the positive thinkers and doers can not say like it.
Gajendra
Yeah. I'm pessimistic
The
and I procrastinate too much
The
is true
Souley
yea hello
Kojo
what's the scope for an economist?
Aman
no idea
Steven
I'm having exams soon but I barely know the concepts, monopoly is difficult
Steven
I can help with assignments
Nhamo
Gajendra or anybody can you advice me on how I can improve on studying Economics
The
should I read a topic everyday. it will be difficult because I have other courses
The
what's unemployment
Souley Reply
increase in inflation
Zain
increase in jobless peaople
Zain
who are capable of doing job
Zain
hi
Vijay
hi
Zain
distinguish between substitution effect and income effect
albert Reply
Elucidate more on this please!
Moshood Reply
hello
Kojo
hi
Peter
cfgjgdxgfxfgddhtdg
Abdal
Hi
Anamaya
Watsup
Darlington
Hello
Darlington
hi
Abdal
Who is an economist
Darlington
Hi
Ihtisham
hi
Peter
hi
Abdal
yes
Fazal
still studying
sean
The substitution effect is the change in consumption patterns due to a change in the relative prices of goods.
Moshood
Income effect is the change in consumption patterns due to the change in purchasing power.
Moshood
still freshman studying at Tubman University
Emmanuel
db awlad 97ab ghir ghatchr7ou liya chno wa93 hna wachmn level hada wla ghan7iw chi wld 9ahba fikom
Brahim
hi
Chidi
hi
bola
hey
cherie
hlw
God
Hi
Owusu
Hi
Patricia
hi
Rod
hi
shaikh
what is agriculture?
Emmanuel
Srsly
Neil
Hi everyone.
Royal
Economic is a subject which study buying and selling.
Royal
can u elaborate more?
Dazy
it is the study of the wealth of of a nation
Adesina
It can also be defined as the social science that studies how the available scarce resources can be distributed to satisfy unlimited human want
Adesina
elo house !
Adesina
I ave a question too
Adesina
hi
Prtj
guys I have questions which I am not able to solve could you guys help me
Prtj
ask
kartik
what is economic about
Gene
What the difference between economics and economics education?
Rasaq
economics is all about natural resources and how they are distributed to satisfied human wants
Souley
Almsot the same
Steven
what z international trade
ntaate Reply
The exchange of produce and services among different countries.
Anamaya
the exchange of good & services across international boundaries
WILSON
conditions of international trade?
Nusrat
Compare and contrast between Natural and Artificial Resources and their ultimate impacts in an economy. Give one example to support your discussion.
Angela Reply
Exemple: Diamant or uranium, fer, calcaire
Ramadan
how does interest rate affect aggregate output
kelvin Reply
what is Keynesian theory
kelvin
need a curves for typical isoquost and isoquant
kelvin
what is isoquant
kelvin
isoquat is a curve shows differnt combinations of two inputs which can produce same level of output
Majid
examples of giffen goods
Getrude
then what isoquost
Peter
, if the price of an essential food staple, such as rice, rises it may mean that consumers have less money to buy more expensive foods, so they will actually be forced to buy more rice.
Peter
that's an example
Peter
majid Khan that's the wrong definition of isoquant
The
you are defining isocost
The
isocost curve is a locus of points that shows the different combinations of commodities purchased by a consumer with a fixed budget
The
The change in fiscal policy leads to an increased level of output and interest rates is because an increase in government expenses directly affects aggregate demand. A decline in taxes result in more disposable income, consequently leading to a rise in consumption expenditure.
Peter
dats for kelvin
Peter
dats d answer for the audio how does interest rate affect aggregate output
Peter
question not audio
Peter
u are right joker
Peter
what is journal entry?
Abel
explain the nature of economics
Matilda Reply
interpret micro economic issues
Matilda
ito ang dami ng producto na nais handa at kanyang ibenta ng isang prodyuser
Jomar Reply
i dont understand
Gaabshe
even I also don't understand ..this language.. vn I converse everybody say farzana ur language is not understood by all user? now no one there is question about it?
shaikh
he is saying that "this is the amount of product it wants to be ready and sells by a producer"
Aman
I Merr has knowledge,which is the economiccircuit role in a society
Ramadan
What is diminishing returns?
Shadrach Reply
explain competitive demand
ADENIJI Reply
the demand that are compiting for sale. the buyer can substitute one for another good
Iftikhar
yg
Margarette
the demand where commodities fight for the market. in this type of demand, commodities can be substituted for the most suitable one subject to ( price, consumers choice, consumers income etc)
WILSON
Demand is said to be competitive when a commodity that is needed to satisfy wants in place of another similar goods. increase in price of a commodity X will result in increase in demand of the substitute (commmodity Y).
yusuf
examples of giffen goods are garri (cassava), maize
yusuf Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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