Monopolies’ Production & Pricing Decisions
- A monopoly can decide the price of its product or service as it is the only producer and provider in its market.
- Its demand curve is the market demand curve.
- The demand curve will slope downwards.
- Monopolists must choose a lower price in order to sell more.
How to calculate a Monopoly's Revenue
- Total Revenue= The Quantity Sold x Price
- Average Revenue= Total Revenue / Quantity Sold
- Marginal Revenue= Amount of revenue a business will get for each extra unit it sells.
REMEMBER:
- A Monopolist's average revenue= Price of the good or service.
- A Monopolist's marginal revenue < Price of the good or service.