$

$
$

Price
20.00
18.00
16.00

$
$
$

TR
18.00
32.00

MR
-$18
$14

$
$
$

$10

$ 14.00

$ 42.00

4
5

$
$

$
$

12.00
10.00

48.00
50.00

$6
$2

TC
20.00
21.00
24.00

ATC
-21.00
12.00

$
$

MC
-1.00
3.00

$
$

$ 30.00

$ 10.00

6.00

$
$

$
$

$
$

10.00
15.00

$
$

40.00
55.00

$
$

10.00
11.00

Monopoly Profit
-(3.00)
8.00

$50.00

12.00

$40.00

8.00
(5.00)

The Marginal Analysis graph and the 1st Monopoly graph share many commonalities. Foremost
is that the 1st Monopoly graph is actually graphing a Marginal Benefit (MB) and its Marginal
Costs. In this case the benefit is called revenue (MR). The second commonality is that the point
where MR=MC is the point of optimimization on the 1st Monopoly graph is similar to the MB=MC
point on the Marginal Analysis graph. Both of these graphs utilize line to show the optimization
point for where the maximum net benefit is achieved. The axes are also similar, Output is simply
the Quantity produced. Lastly, the Monopoly graph is a more specific model of the Marginal
Analysis graph.

1st Graph- Monopoly

$60.00

$30.00

Price

Output
0
1
2

$20.00
$10.00
$-

$(10.00)

Output
Price

TR

MR

TC

ATC

MC

Monopoly Profit

2nd Graph- Monopoly

$25.00

4 Steps to solve for profit:

$20.00

Price

1) find where MR=MC

This is the quantity they will produce at: 3 units (cannot sell partials)
2) Go up from where MR=MC until you intersect the Price line. The price line is the demand line.
This is the price that should be charged per unit at this output: $15
3) From that point go down to the Average Total Cost line (ATC).
This is the cost per unit at this output: $10
4) (Sales price per unit - ATC per unit) X Units of output =
the Area of the rectangle formed by the line, dotted lines and border of graph at output zero.
This is the profit gained from selling all the units at the price: $15

$15.00

$10.00
$5.00
$0

Output
Price

MR

ATC

MC