A monopolist maximizes profits by choosing an output such that marginal revenue equals marginal cost. This is in contrast to a perfect competition where firms maximizes profits at price equal to marginal cost. Mathematically, the monopolist profit can be calculated as such:
π = pq-cq, where π is the profits, p is the price, c is the marginal cost and q is the quantity
The price reflects the inverse demand function; p=a-bq, where a is a constant and b is the slope (e.g. p=100-2q)
If we insert this expression into the profit function it can be written as follows:
π = (a-bq)q-cq
Taking first order conditions (The derivative of π with respect to q) and put the condition equal to zero (Finding the stationary point (maximum) for the function):
dπ/dq= 0 -->
-bq+a-bq-c=0
Rewriting the expression:
a-2bq=c, where a-2bq is the marginal revenue, and c is the marginal cost
Solving this expression with respect to q:
q=(a-c)/2b
This is the optimal output of the monopolist, to find the price we insert this expression inte to expression for p we had earlier:
p=a-b(a-c)/2b
Rewritten:
p=(a+c)/2
This is the optimal price of the monopolist. To find the profit we now insert the expression for optimal output and optimal price into the profit expression:
π = (a-bq)q-cq --> π = ((a+c)/2-c)(a-c)/2b
Simplifying and rewriting the expression we get:
π = (a-c)^2/4b
This might look a bit challenging if you are not used to working with algebra on general form, however, if you insert your specific numbers in the beginning it is quite straight forward.
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Monopolists are considered allocatively inefficient because they set prices above marginal costs, leading to a decrease in consumer surplus and an overall loss of economic welfare. Unlike in competitive markets, where prices reflect the true cost of production and resource allocation is optimized, monopolies restrict output to maximize profits. This results in fewer goods being produced and consumed than would be socially optimal, causing a deadweight loss to society. Consequently, resources are not allocated in a way that maximizes total welfare.
Maximize its profits
More, at less cost than their competition.
Maximizing the owner's wealth means, In short & medium organization- maximize the profit of the organization. And in Corporation- maximize the value of share. hazrasabbir@yahoo.com
It is a true statement that the objective, or goal, of management is to maximize profits. Another term for profit would be financial gain.
to maximize profits for their owners.
The goal of a corporation is to maximize profits. Furthermore, the goal of a publicly traded corporation is to maximize value for its shareholders.
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Monopolists are considered allocatively inefficient because they set prices above marginal costs, leading to a decrease in consumer surplus and an overall loss of economic welfare. Unlike in competitive markets, where prices reflect the true cost of production and resource allocation is optimized, monopolies restrict output to maximize profits. This results in fewer goods being produced and consumed than would be socially optimal, causing a deadweight loss to society. Consequently, resources are not allocated in a way that maximizes total welfare.
Maximize its profits
More, at less cost than their competition.
A monopolist must lower its quantity relative to a competitive market to maximize its profits because the monopolist already controls and owns the largest share of the market.
Maximizing corporate profits is a kind of idea which is simple, obvious and straightforward. To maximize a profit is to squeeze in as much value of a certain resources as possible.
There are many places where one could go to learn how to maximize their profits when they go to sell items online. There have been many books written on this subject especially for the website eBay.
Deadpool said once in a movie, "maximize your efforts to be successful."
Maximizing corporate profits is a kind of idea which is simple, obvious and straightforward. To maximize a profit is to squeeze in as much value of a certain resources as possible.