If a company or organisation is a monopoly it has no competition. Therefore it can do anything it wishes to maximize its profit
The pure monopolist's market situation differs from that of a competitive firm in that the monopolist's demand curve is downsloping, causing the marginal-revenue curve to lie below the demand curve. Like the competitive seller, the pure monopolist will maximize profit by equating marginal revenue and marginal cost. Barriers to entry may permit a monopolist to acquire economic profit even in the long run.
(A) A monopolist produces on the inelastic portion of its demand. This is true because a monopolist maximizes profit where marginal revenue equals marginal cost, and inelastic demand allows the monopolist to raise prices without losing too many customers. However, (B) is not necessarily true, as a monopolist can incur losses in the short run, and (C) is incomplete, but typically, the more inelastic the demand, the closer marginal revenue will be to price.
The monopolist can choose either the price or the quantity, but choosing one determines the other - they come in pairs.
Produce in the elastic range of the demand curve
If a company or organisation is a monopoly it has no competition. Therefore it can do anything it wishes to maximize its profit
The pure monopolist's market situation differs from that of a competitive firm in that the monopolist's demand curve is downsloping, causing the marginal-revenue curve to lie below the demand curve. Like the competitive seller, the pure monopolist will maximize profit by equating marginal revenue and marginal cost. Barriers to entry may permit a monopolist to acquire economic profit even in the long run.
(A) A monopolist produces on the inelastic portion of its demand. This is true because a monopolist maximizes profit where marginal revenue equals marginal cost, and inelastic demand allows the monopolist to raise prices without losing too many customers. However, (B) is not necessarily true, as a monopolist can incur losses in the short run, and (C) is incomplete, but typically, the more inelastic the demand, the closer marginal revenue will be to price.
The monopolist can choose either the price or the quantity, but choosing one determines the other - they come in pairs.
Produce in the elastic range of the demand curve
The monopolist's profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output. Indeed, the condition that marginal revenue equal marginal cost is used to determine the profit maximizing level of output of every firm, regardless of the market structure in which the firm is operating.
the point where the marginal cost curve intersects the marginal revenue curve
A monopolist earns economic profit when the price charged is greater than their average total cost. To maximize profits, monopolies will produce at the output where marginal cost is equal to marginal revenue. To determine the price they will set, they choose the price on the demand curve that corresponds to this level of production.
The monopolist pricing condition occurs where marginal cost equals marginal revenue. The monopolist does not follow usual demand or supply curves. It instead optimises its total profit by setting its production decision (aka - how many units) to where the marginal profit of the last unit equals 0, then 'marking-up' the price by setting it directly above this equilibrium on the original demand curve. The total profit derived from this condition is called the monopolist profit.
A perfectly competitive firm maximizes profit in the short run by producing the quantity where marginal cost equals marginal revenue. In the short run, firms can make profits due to price fluctuations and temporary market conditions, but in the long run, new firms can easily enter the market, increasing competition and driving down prices to the point where economic profits are reduced to zero.
The Monopolist - 1915 was released on: USA: 21 August 1915
A monopolist has more control over pricing because it is the sole provider of a good or service, allowing it to set prices based on its desired profit maximization strategy. In contrast, a perfectly competitive firm is a price taker, meaning it must accept the market price determined by the overall supply and demand. Therefore, it is generally easier for a monopolist to determine price compared to a perfectly competitive firm.