It is TR-TC. If the monopolist’s average cost is greater than the price of its product, the firm would suffer a loss. In the right-hand graph, the firm’s average cost curve is greater than price, and it is losing money. Total cost is AC* x Q*m, but total revenue is only P*m x Q*m, so TC>TR.
Click to read full answer. Similarly, it is asked, how do you calculate average total cost?
Average total cost (ATC) is calculated by dividing total cost by the total quantity produced. The average total cost curve is typically U-shaped. Average variable cost (AVC) is calculated by dividing variable cost by the quantity produced.
One may also ask, how do you find the profit maximizing price for a monopoly? Determine marginal cost by taking the derivative of total cost with respect to quantity. Set marginal revenue equal to marginal cost and solve for q. Substituting 2,000 for q in the demand equation enables you to determine price. Thus, the profit–maximizing quantity is 2,000 units and the price is $40 per unit.
Likewise, people ask, does price equal average total cost in a monopoly?
An industry is a natural monopoly if a single firm can produce all of the relevant output at a lower average total cost than could any combination of two or more firms. This would mean that the firm would be required to charge a price that is equal to average total cost.
Is Google a monopoly?
One analyst says “there’s zero empirical evidence” that Google acts as a monopoly and does real harm, even though “60 Minutes” put the search engine back in the antitrust crosshairs. But Google itself is afraid of competition — from giants like Amazon or from smaller start-ups, Pethokoukis said.
How do you calculate total revenue?
Total revenue is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by the price of the goods and services.
How do monopolies make profit?
In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.
How do you calculate total output?
Total output can be measured two ways: as the sum of the values of final goods and services produced and as the sum of values added at each stage of production. GDP plus net income received from other countries equals GNP. GNP is the measure of output typically used to compare incomes generated by different economies.
Where is profit on a monopoly graph?
The monopolist will charge what the market is willing to pay. A dotted line drawn straight up from the profit-maximizing quantity to the demand curve shows the profit-maximizing price. This price is above the average cost curve, which shows that the firm is earning profits.
How do you work out the marginal cost?
To calculate marginal cost, divide the difference in total cost by the difference in output between 2 systems. For example, if the difference in output is 1000 units a year, and the difference in total costs is $4000, then the marginal cost is $4 because 4000 divided by 1000 is 4.
What is the cost formula?
The cost equation is typically the cost of manufacturing and selling one item multiplied by the number of items sold and added to the company’s overhead costs.
How do you find the fixed cost?
The formula used to calculate costs is FC + VC(Q) = TC, where FC is fixed costs, VC is variable costs, Q is quantity, and TC is total cost. It is important to understand that variable costs, as opposed to fixed costs, are those costs that change based on the amount of product being produced.
What is the formula to calculate average cost?
In accounting, to find the average cost, divide the sum of variable costs and fixed costs by the quantity of units produced. It is also a method for valuing inventory. In this sense, compute it as cost of goods available for sale divided by the number of units available for sale.
What is total cost function?
Definition: A cost function is a mathematical formula used to used to chart how production expenses will change at different output levels. In other words, it estimates the total cost of production given a specific quantity produced.
What is total cost equal to?
Total cost is equal to the sum of total fixed cost and total variable cost. D. Average variable cost is equal to total variable cost divided by the quantity of output. Average fixed cost is equal to total fixed cost divided by the quantity of output.
Which is the best example of price discrimination?
Price discrimination: A producer that can charge price Pa to its customers with inelastic demand and Pb to those with elastic demand can extract more total profit than if it had charged just one price. An example of price discrimination would be the cost of movie tickets.
Is price equal to marginal cost?
In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC). This implies that a factor’s price equals the factor’s marginal revenue product. At this point, price equals both the marginal cost and the average total cost for each good (P = MC = AC).