Access over 20 million homework & study documents

search

How does a monopolist rationally optimize profits

Type

Homework

Rating

Showing Page:
1/1
Monopolist means a person or group of person with a monopoly, in simple terms it is an
individual or organization which controls all the products in the market. The monopolist chooses
the production or output which maximizes the profits.
According to law of demand, when prices decreases quantity demanded increases and when
prices increases quantity demanded decreases. Now let us take an example
Price(in $) Quantity demanded Revenue(in $)
5 100 500
4 200 800
3 300 900
2 400 800
1 500 500
In the example, as the price decreases quantity demanded increases. When the price reaches $3
the quantity demanded is 300 units and revenue is maximum ($900). Further when prices
decreases to $1 quantity demanded increases to 500 units and revenue generated is $500 which
means revenue starts decreasing after reaching an optimal point.
The monopolist must decide the prices which are neither high nor low rather an optimal price
with an optimal demand. Thus resulting into maximum revenue.

Sign up to view the full document!

lock_open Sign Up

Unformatted Attachment Preview

Monopolist means a person or group of person with a monopoly, in simple terms it is an individual or organization which controls all the products in the market. The monopolist chooses the production or output which maximizes the profits.According to law of demand, when prices decreases quantity dem ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
I use Studypool every time I need help studying, and it never disappoints.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4