The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-If a monopolist's demand curve shifts to the left such that it becomes tangent to the ATC curve at the output for which marginal revenue equals marginal cost, the monopolist will make only a normal profit.

Question

The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
  D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-If a monopolist's demand curve shifts to the left such that it becomes tangent to the ATC curve at the output for which marginal revenue equals marginal cost, the monopolist will make only a normal profit.

Quizplus · Accepted Answer

When the demand curve shifts to the left, the monopolist's total revenue decreases. As a result, the profit-maximizing output decreases, and the price of the good or service is reduced. If this new output level is where marginal cost (MC) equals marginal revenue (MR) and the demand curve is tangent to the average total cost (ATC) curve at this point, the monopolist will be earning only normal profits, as its total revenue will be equal to its total costs. Therefore, the statement is true.

The Figure Given Below Shows the Cost and Revenue Curves