Price Output Decision Under Monopoly

Under monopoly, the industry demand curve is identical to the firm demand curve. Because industry demand curves slope downward, monopolists also face a downward-sloping demand curve. In Figure 10.7, for example, 100 units can be sold at a price of $10 a unit. At an $8 price, quantity demanded rises to 150 units. If the firm decides to sell 100 units, it will receive $10 a unit; if it wishes to sell 150 units, it must accept an $8 price. The monopolist can set either price or quantity, but not both. Given one, the value of the other is determined along the demand curve.

A monopoly uses the same profit-maximization rule as does any other firm: It operates at the output level at which marginal revenue equals marginal cost. The monopoly demand curve

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