Monopoly – short run equilibrium

• MC = MR• Slope of the MC > slope of the MR at the point of

intersection

• ExampleQ = 50 – 0.5PTC = 50 + 40QWhat is TR? MR?MC? Profit maximization out put?

• TRDemand curve is solved for PP = 100 – 2QTR = PQTR = Q(100 – 2Q)TR = 100Q – 2Q2

• MRMR = dR = 100 – 4Q

dq

• MCTC = 50 + 40Q MC = dTC = 40

dq

• Profit maximization output?MR =MC100 – 4Q = 40Q =15

• What is the price at which profits are maximizing?P = 100 – 2Q P = 100 – 2* 15 = 70

• What is the total profit when profits are maximizing?Profits = TR –TC = 1050 -650 = 400