Price
The figure below shows the demand and cost curves for a monopolist. Assume there are no fixed costs in the market and an unlimited number of units of the product can be produced at a marginal cost of $10 per unit. As a result average total cost and marginal cost are the same.
$15
b
$10
e
25
40
MR
ATC = MC=10
Demand
Quantity
1. Find the output level and the price charged to consumers. when the monopolist is maximizing its profit.
2. Find the monopoly's total economic profit when it is maximizing its profit. 3. What would be the market price and the market quantity, if the industry in the figure is perfectly competitive (Assuming a constant cost industry)?
