shows total revenue for the firm. The lighter-shaded box, which is quantity on the horizontal axis and average cost of

production on the vertical axis shows the firm's total costs. The large total revenue box minus the smaller total cost

box leaves the darkly shaded box that shows total profits. Since the price charged is above average cost, the firm is

earning positive profits.

Figure 9.7 illustrates the three-step process where a monopolist: selects the profit-maximizing quantity to

produce; decides what price to charge; determines total revenue, total cost, and profit.

Step 1: The Monopolist Determines Its Profit-Maximizing Level of Output

The firm can use the points on the demand curve D to calculate total revenue, and then, based on total

revenue, calculate its marginal revenue curve. The profit-maximizing quantity will occur where MR = MC—or at

the last possible point before marginal costs start exceeding marginal revenue. On Figure 9.6, MR = MC occurs
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