08+Monopoly

A beginning diagram is shown below.

The initial diagram has an ATC curve and a Demand and Marginal Revenue curve for a monopolist. Add a new layer. To the grid add an MC curve and label the profit maximizing price and quantity Po and Qo for the monopolist. Add another layer, draw and the label rectangle representing economic profit. Upload the completed diagram to this Wiki page, then in the explanation field explain how to calculate the amount of profits you have diagrammed.

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

Where marginal revenue=marginal cost is where the profit maximizing output occurs. The price is shown on the demand curve at the quantity where MR=MC. Based on the graph MR=MC occurs at a quantity of 36 and price of $6.00 which gives a total revenue of $216. Total cost at a quantity of 36 is about $153. To get the economic profit subtract TC from TR and profit will be $63. ||  || || The marginal curve in red is supposed to intersect at the lowest point of the ATC curve and also shows where the profit will be maximized when it intersects with the marginal revenue curve at point A. This will give the optimized quantity which is approximately 32 (Qo) And along the y axis above point A will give the maximum price which is approximately 6.5 (Po). To optimize the price, look at the point above A on the y axis where the line intersects with the ATC curve, it’s approximately 4.5. So the change in price would be $2. Multiply that with the quantity (2 x 32) and the total profit would be $64. ||  ||
 * 2 || John Doe
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