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The short run equilibrium of monopolist is displayed below in figure.
Figure: Abnormal Profit under Monopoly
AR is the average revenue curve, MR is marginal revenue curve, AC is average cost curve and MC is marginal cost curve. Up to OQ, level of output marginal revenue is greater than marginal cost though beyond OQ the marginal revenue is less than marginal cost.
So the monopolist would be in equilibrium where MC=MR. So a monopolist is in equilibrium at OQ level of output and at OP price. He earns abnormal profit equal to PRST. Though, it isn't always possible for a monopolist to earn super normal profits. If cost and demand situations aren't favourable, monopolist may incur short run losses.
Figure: Loss under Monopoly
Though monopolist is a price maker, because of high costs andweak demand, he suffers a loss equal to PABC as displayed above in figure.
Total Cost (TC) This is the sum of fixed costs and variable costs i.e. TC = FC + VC.
price output determination under monopoly explain
Question: (a) The regression results for the quantity demanded of good X is given by ln Q X = 1220 - 9.5 ln P X - 2.21 ln P Y + 1.01 ln M t values (5.3) (-5.1
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