Question

Show three graphs representing the three different kinds of profit that a monopoly can make: making...

Show three graphs representing the three different kinds of profit that a monopoly can make: making positive profit, making a loss, and making zero (economic) profit. Include the demand, marginal revenue, marginal cost, and average total cost curves. For the first two, shade in the area that represents profit or loss.

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Answer #1

The monopoly firm choose to produdce where the marginal revenue equals the marginal cost of production , this is the point where they maximize the profits. Whe the firm is earning a positive profit , the average cost will be below the price. If its making a loss the average total cost should be above the price , and the firm earns zero economic profit when the price equals the average total cost.

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