Multi-plant monopolist:
The monopolist may operate more than one plant, and the cost conditions may differ from one plant to another. In the following table MC1 and MC2 are the marginal costs of the first and the second plants. The combined marginal cost
(MC) is obtained as follows:
The monopolist produces first 2 units in plant 1 because the marginal cost (MC) are lower there. Thus, MC of first 2 units are 2.3 and 2.4 respectively. For the 3rd unit MC is 2.5 in plant 1 but the monopolist can produce it from its 2nd
plant where the MC for producing it would be 2.45. For each successive unit, the monopolist looks for whether it could be produced at a lower MC at plant 1 or 2 and chooses the plant with lower MC. The overall MC is shown in the column MC. We equate MR and overall MC and see that at 9 units of output MR = MC = 2.75. Of these nine units, five are produced in plant 1 and four in plant 2.
The above analysis applies to short-run (SR, equilibrium and we have considered only MC not average total cost (ATC) for the two plants. If the fixed cost is very high in any plant, the monopolist will be facing losses and it will close down unprofitable plants.
In the long-run (LR) the monopolist with a single plant adjusts the plant size and produces the output where long-term marginal cost (LRMC) is equal to MR. Note that this point may not be the minimum point of the long-run average cost curve as it is in case of perfect competition.
For monopoly, the long-run equilibrium is given by:
LRMC = SRMC = MR and LRAC ≤ Price
For the multi-plant monopolist, the long run equilibrium condition is the same except that the multi-plant monopolist might adjust not only the plant size but also the number of plants as well. She might close down unprofitable plants and open new ones.