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    Monopolist: Profit Maximizing price and level

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    Use Figure 8.2, which represents the situation faced by a monopolist, to answer questions a-c.
    Figure 8.2 - Attached file

    a. In Figure 8.2, indicate the profit maximizing price and output level and label them P1 and Q1.

    b. Shade in the area that represents the firm's economic profit (or loss).

    c. If this firm wished to discourage entry by other firms it could produce the output level at which it earns only a zero economic profit. Indicate the price and output level associated with a zero economic profit and label them P2 and Q2.

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    Solution Summary

    The answers are marked in the graph (shaded) along with brief explanations.