11+Regulation

A beginning diagram is shown below.



The initial diagram depicts a monopoly firm in the left panel and a monopolistically competitive firm in the right panel. In the first layer draw perpendiculars to represent and label the profit maximizing price (Po) and the profit maximizing quantity for each firm (Qo). In a new layer represent the economic profit for each firm. Upload the completed diagram to this Wiki page, then in the explanation field explain how in the long run economic profits are positive for the monopoly and zero for the monopolistically competitive firm.

||
 * Num || Name || Diagram and Explanation ||  ||
 * 1 || Sally Smith

In the long run economic profits are positive for monopoly because Po is above ATC at Qo. In other words the monopoly can cover it's total cost and earn a profit because of the price charged at quantity (Qo). The area designated as profit on the monopoly graph is where profit maximization occurs or where MR=MC and where that quantity (Qo) appears on the demand curve. Total profit is given as Qo multiplied by (Po - ATC).

In the monopolistically competitive firm where MR=MC, the ATC curve is tangent to the demand curve giving Po at Qo. Since average total cost is tangent to the demand curve the monopolistically competitive firms gain no economic profit and instead breaks even. ||  || ||
 * 2 || John Doe

A monopoly will maximize its profits where MR=MC. In the long run profits are positive because the firm can continue to charge a price that is at Qo which covers total cost. The Red box shows where MR=MC and the profit maximization occurs. In a monopolistically competitive firm they still produce where MR=MC. Over time the curve shifts because new firms can enter the market changing their potential profit. When the ATC curve is tangent to the demand curve the firm breaks even and there is no economic profit. ||  ||
 * 3 ||  ||   ||   ||
 * 4 ||  ||   ||   ||
 * 5 ||  ||   ||   ||
 * 6 ||  ||   ||   ||
 * 7 ||  ||   ||   ||
 * 8 ||  ||   ||   ||
 * 9 ||  ||   ||   ||
 * 10 ||  ||   ||   ||
 * 11 ||  ||   ||   ||
 * 12 ||  ||   ||   ||
 * 13 ||  ||   ||   ||
 * 14 ||  ||   ||   ||
 * 15 ||  ||   ||   ||
 * 16 ||  ||   ||   ||
 * 17 ||  ||   ||   ||
 * 18 ||  ||   ||   ||
 * 19 ||  ||   ||   ||
 * 20 ||  ||   ||   ||
 * 21 ||  ||   ||   ||
 * 22 ||  ||   ||   ||
 * 23 ||  ||   ||   ||
 * 24 ||  ||   ||   ||
 * 25 ||  ||   ||   ||
 * 26 ||  ||   ||   ||
 * 27 ||  ||   ||   ||
 * 28 ||  ||   ||   ||
 * 29 ||  ||   ||   ||