Marginal Revenue for a Monopolist
Quantity of
Output
1
2
3
4
5
6
7
8
9
Selling Price
($)
44
40
36
32
28
24
20
16
12
Total Revenue
($)
44
80
108
128
140
144
140
128
108
Marginal Revenue
($)
44
36
28
20
12
4
−4
−12
−20
50
Cost and Price ($)
40
MC
B
30
C
28
20
A
12
Demand
10
0
1
2
3
4
5
-10
6
7
8
9
MR
-20
Quantity
MC
Price
PM
Consumer
Surplus
B
Deadweight
Loss
Transfer
C
PE
Producer
Surplus
A
Demand
QM
QE
Quantity
PA
PB
Price
PC
PD
Demand
QA
Q all buyers
Quantity
Price
MC
Producer
Surplus
E
PE
Demand
QE
Quantity
Price
MC
D1
MR 1
D2
MR 2
Quantity
Firm 2’s Options!
Firm 1’s Options!
Low Price!
High Price!
low profit!
Low Price!
low profit!
high profit!
high profit!
High Price!
loss!
loss!
moderate profit!
moderate profit!
Summary of Traditional Market Structures
Number of
Sellers in the
Market
Type of Item(s)
Sold
Market Power of
an Individual
Seller
Entry Barriers
Long-Run
Economic Profit
ProfitMaximizing
Condition
Perfect
Competition
Pure Monopoly
Monopolistic
Competition
Oligopoly
many
one
many
few
identical
unique
differentiated
varies
none
very high
some
substantial
none
very high
none
some
zero
positive
zero
varies
MC = P
MC = MR
MC = MR
varies
Quantity of
Output
(demanded)
1
2
3
4
5
Selling
Price ($)
17
14
11
8
5
Total
Revenue
($)
Marginal
Revenue ($)
--
Firm 2’s Options!
Firm 1’s Options!
New Outlet!
No New Outlet!
moderate profit!
New Outlet!
moderate profit!
No New
Outlet!
no profit!
high profit!
high profit!
no profit!
no profit!
no profit!
Economic Profit
50
Cost and Price ($)
40
Demand
MC
30
20
ATC
10
Total Cost
0
1
2
3
4
5
6
-10
7
8
9
MR
-20
Quantity of Hair Dryers
Cost and Price ($)
MC
B
ATC
A
Total Cost =
Total Revenue
MR
Quantity
Demand