Monopoly Analysis of the Natural Monopoly Case
The profit-maximizing output (QM) occurs where MC=MR and the profit-maximizing price is found by tracing upward to point a, the price that the market will bear (PM). The monopolists profit is derived by finding the ATC at QM which is ATCM. The monopolist’s profit is thus TR-TC or [(PM x QM) – (ATCM x QM)] which is represented in the diagram ... ................
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