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Draw the cost curves and demand and MR for a monopoly making a profit.

  1. Draw the cost curves and demand and MR for a monopoly making a profit.
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Answer #1

The demand curve for the monopolist is given by 'D' which is downward sloping. The margial revenure curve is represented by 'MR' which is also downward sloping. The cost curves of the monopolist is represented by the marginal cost curve 'MC' and average cost curve 'AC'.

The equilibrium for the monopolist occurs at the point 'S' where MR = MC. The monopolist produces quantity Q1 and charges the price P1. The average cost for the monopolist is P2, thus the monopolist is making profits as P1 > P2. The profits of the monopolist is shown by the area P1RTP2.

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