Mostly summarized from Gregory Mankiw’s
Principles of Economics, 5th
Ed.
PART 5 Firm Behavior
and the Organization of Industry
Chapter
15 of 36 Monopoly
Section 12 of 32
…
Figure 5 here
…
Figure 5 - The Monopolist's Profit
The
area of the box BCDE equals the profit of the monopoly firm.
BC the
height of the box is price minus average total cost which
equals profit per unit sold.
DC the
width of the box is the number of units sold.
…
Abbreviations:
Total
Revenue TR
Total
Cost TC
Average
Total Cost ATC
Quantity
of units produced Q
Price P
…
Total
profit = TR – TC
Price per unit = average revenue = TR / Q
Cost per unit = ATC = TC / Q
Total
profit = (P - ATC) x Q
… …
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