A single-price profit-maximizing monopolist is enjoying economic profits.

(a) Graph its marginal cost (MC), average total cost (ATC), marginal revenue (MR), and demand curves (D), labeling all.

(b) Label its profit-maximizing price (PM) and quantity (QM).

(c) What would happen to the firm's total revenue if it produced more than the profit-maximizing quantity? Explain.

(d) The firm becomes able to perfectly price discriminate. Label its new profit-maximizing quantity of production QM2.

(e) Shade the entire area(s) of increased firm revenue.

(f) Will the change in part (d) cause the monopoly to become allocatively efficient? Explain.

TAKE INTO ACCOUNT THIS FEEDBACK WHEN ADRESSING THESE QUESTIONS:

ATC should cross through MR and D. Your equilibrium points should be dashed lines to the axis. Everything should be on one single graph.

Part c- Pay close attention here. The monopoly operates on what part (elasticity wise) of the demand curve? Then, as we increase quantity, what does that mean for total revenue? Then... MR crosses the X-axis. What does that mean for the elasticity of demand... and what will that mean for the total revenue now?

Part d- Check again in the course where the price discriminating point is on a monopoly graph.

Part e- For a single price monopoly.. isn't the TR the entire rectangle of PxQ? So what you are doing here is finding the difference. For a price discriminating monopoly, they have many prices (the demand curve). So the total revenue for a price discriminating monopoly would be everything under demand, up until the quantity for the price discriminating monopoly. For this question, you are shading the area(s) added in to TR (so excluding or subtracting the TR from a single price monopoly).