and the firm can make higher profits by reducing its quantity of output.

Quantity

Total Revenue

Marginal Revenue

Total Cost

Marginal Cost

Q

TR

MR

TC

MC

1

2

3

4

5

6

7

8

1,200

2,200

3,000

3,600

4,000

4,200

4,200

4,000

1,200

1,000

800

600

400

200

0

500

775

1,000

1,250

1,650

2,500

500

275

225

250

400

850

4,000

1,500

–200

6,400

2,400

TABLE 9.3 Costs and Revenues of HealthPill

A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and

marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm

should produce the extra unit.

For example, at an output of 4 in Figure 9.5, marginal revenue is 600 and marginal cost is 250, so producing

this unit will clearly add to overall profits. At an output of 5, marginal revenue is 400 and marginal cost is 400,
226 9 • Monopoly
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