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Understanding the Monopolists Market Structure.

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In the diagram included below:

a. What does the area EBCD represent? Provide a full explanation of the concept that is shown in that area.
b. What does the point A, which occurs at the intersection of the green and blue lines, represent?
c. What does point E represent, and how is it determined?
d. Why might it be appropriate for the government to allow a pharmaceutical company to have a monopoly in the production of a drug?
e. Does the eventual ending of that monopoly cause the monopolist to lose all of its market power? Explain

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Solution Summary

Given a set of cost curves, demand, and marginal revenue, I interpret various points on the graph including the area representing profit, profit maximizing level of output, and market price. I also provide a discussion of when it might be appropriate to allow a pharmaceutical company a monopoly position in the production of a drug. Finally, I discuss the effects on the market after the companies monopoly on the product ends.

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please see attached for explanation and graphs.

7. In the diagram included below
a. What does the area EBCD represent? Provide a full explanation of the concept that is shown in that area.
The area EBCD represents the profit that accrues to the monopolist. Recall the formula for profit can be written as
Profit = TR - TC = P*Q - ATC*Q = (P - ATC)*Q. The distance between E&D is P-ATC and the distance between E&B (and D&C) is Q.

b. What does the point A, which occurs at the intersection of the green and blue lines, represent?
Recall that all firm's maximize profit by setting MR=MC. Point "A" characterizes the point where MR=MC. This determines the profit maximizing level of output for the monopolist "Q".

c. What does point E ...

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