Demand and Cost facing Monopolist Price Quantity Total Revenue Marginal Revenue Total Variable Cost Marginal Cost Total Cost Profit $10 10     $30       $9 20     $50       $8 30     $60       $7 40     $80       $6 50     $110       $5 60     $150       $4 70     $210       $3 80     $290       $2 90     $390       We learned that in a competitive market equilibrium the Marginal Cost equals the Price, as Marginal Revenue is the same as Price for a perfectly competitive seller. Now, how does the Marginal Cost compare to Price at the monopolist's profit maximizing output and price combination? If Price is generally seen as the monetized Marginal Benefit to consumers of the product and Price exceeds Marginal Cost, then this is allocatively inefficient, as Marginal Benefit exceeds Marginal Cost. Given the monopolist's choice of price and quantity that you found, what is the Marginal Cost at this quantity? Is it close to the price, or clearly less than price? Do you think this monopolist is "underproducing" and "overcharging" compared to a competitive market? Explain.

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Demand and Cost facing Monopolist

Price Quantity Total Revenue Marginal Revenue Total Variable Cost Marginal Cost Total Cost Profit
$10 10     $30      
$9 20     $50      
$8 30     $60      
$7 40     $80      
$6 50     $110      
$5 60     $150      
$4 70     $210      
$3 80     $290      
$2 90     $390      

We learned that in a competitive market equilibrium the Marginal Cost equals the Price, as Marginal Revenue is the same as Price for a perfectly competitive seller. Now, how does the Marginal Cost compare to Price at the monopolist's profit maximizing output and price combination? If Price is generally seen as the monetized Marginal Benefit to consumers of the product and Price exceeds Marginal Cost, then this is allocatively inefficient, as Marginal Benefit exceeds Marginal Cost.

Given the monopolist's choice of price and quantity that you found, what is the Marginal Cost at this quantity? Is it close to the price, or clearly less than price? Do you think this monopolist is "underproducing" and "overcharging" compared to a competitive market? Explain.

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