chapter  4
40 Pages

Monopoly and Antitrust

As we saw in Chapter 2, marginal revenue is less than price for a monopoly. To maximize profits, monopolies produce output where marginal revenue equals marginal cost, whereas perfectly competitive firms set price equal to marginal cost. Figure 4.1 illustrates the profit-maximizing attendance for a monopoly team with a marginal cost curve that coincides with the horizontal axis, and downward-sloping demand and marginal revenue curves. A competitive industry would sell Qc tickets, where price equals marginal cost.