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

at an output of 5.

Step 2: The Monopolist Decides What Price to Charge

The monopolist will charge what the market is willing to pay. A dotted line drawn straight up from the profit-

maximizing quantity to the demand curve shows the profit-maximizing price which, in Figure 9.6, is $800.

This price is above the average cost curve, which shows that the firm is earning profits.

Step 3: Calculate Total Revenue, Total Cost, and Profit

Total revenue is the overall shaded box, where the width of the box is the quantity sold and the height is the

price. In Figure 9.6, this is 5 x $800 = $4000. In Figure 9.6, the bottom part of the shaded box, which is shaded

more lightly, shows total costs; that is, quantity on the horizontal axis multiplied by average cost on the vertical
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