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 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.
If a company or organisation is a monopoly it has no competition. Therefore it can do anything it wishes to maximize its profit
A perfectly competitive firm will not earn an economic profit in the long run because in a perfectly competitive market, there are many firms selling identical products, leading to price competition. This competition drives prices down to the point where firms only earn enough revenue to cover their costs, resulting in zero economic profit.
A monopolist decides how much product to produce by determining the profit-maximizing output level, where marginal cost (MC) equals marginal revenue (MR). Unlike firms in competitive markets, a monopolist faces a downward-sloping demand curve, meaning it can influence the market price by adjusting production levels. The monopolist will produce less than the socially optimal quantity, leading to higher prices and reduced consumer surplus compared to competitive markets. Ultimately, the goal is to maximize economic profit rather than total output.
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.
If a company or organisation is a monopoly it has no competition. Therefore it can do anything it wishes to maximize its profit
To simply earn profit for the purpose of economic goal.
A perfectly competitive firm will not earn an economic profit in the long run because in a perfectly competitive market, there are many firms selling identical products, leading to price competition. This competition drives prices down to the point where firms only earn enough revenue to cover their costs, resulting in zero economic profit.
A monopolist decides how much product to produce by determining the profit-maximizing output level, where marginal cost (MC) equals marginal revenue (MR). Unlike firms in competitive markets, a monopolist faces a downward-sloping demand curve, meaning it can influence the market price by adjusting production levels. The monopolist will produce less than the socially optimal quantity, leading to higher prices and reduced consumer surplus compared to competitive markets. Ultimately, the goal is to maximize economic profit rather than total output.
Innovate and possibly earn an economic profit in the short run.
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
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'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.
A firm may earn zero economic profit due to factors such as high competition, low barriers to entry, high production costs, and pricing strategies that do not cover all expenses.