Question

Diagram a monopoly making a profit, what are the curves u shaped, and what is the profit maximizing point?

Answer 1

The above graph shows a monopolist making a positive economic profit at the profit-maximizing quantity.

A monopolist maximizes profit where marginal revenue and marginal cost both are equal or the point on a graph where MR and MC curves intersect each other.

So in the above graph, MR and MC are intersecting at Q hence the profit-maximizing quantity is Q.

Profit-maximizing price is on the demand curve at the profit-maximizing quantity.

So from the above graph, the price on the demand curve at the profit-maximizing quantity (Q) is P.

ATC is the average total cost, As ATC is less than profit-maximizing price at Q hence the firm is making the profit.

The green triangle represents the positive economic profit.