Monopolists - Q units of output, it can charge a price of $...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Monopolists: Profit Maximization An illustration of the monopolistically competitive firm's profit-maximizing decision is provided in  Figure 1  .  Figure 1 Short-run profit maximization by a monopolistically competitive firm The firm maximizes its profits by equating marginal cost with marginal revenue. The intersection of  the marginal cost and marginal revenue curves determines the firm's equilibrium level of output,  labeled  Q  in this figure. The firm finds the price that it can charge for this level of output by looking at  the market demand curve; if it provides 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Q units of output, it can charge a price of $ P per unit of output. The firm is shown earning positive economic profits equal to the area of the rectangular box, abcd. Negative economic profits (losses) are also possible. The monopolistically competitive firm's behavior appears to be no different from the behavior of a monopolist. In fact, in the short-run, there is no difference between the behavior of a monopolistically competitive firm and a monopolist. However, in the long-run, an important difference does emerge....
View Full Document

This note was uploaded on 11/19/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Page1 / 2

Monopolists - Q units of output, it can charge a price of $...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online