Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5
-Refer to Figure 10-5.If this single-price monopolist is producing at the profit-maximizing level of output,the total revenue is represented by the area

Question

Suppose a monopolist faces the demand curve and cost curves shown below.  FIGURE 10-5
-Refer to Figure 10-5.If this single-price monopolist is producing at the profit-maximizing level of output,the total revenue is represented by the area

Quizplus · Accepted Answer

Total revenue is maximized when marginal revenue equals marginal cost. At the profit-maximizing level of output, Q0, marginal revenue is equal to P3, and marginal cost is equal to P1. Therefore, total revenue is equal to the area of the rectangle 0P3cQ2.

Suppose a Monopolist Faces the Demand Curve and Cost Curves