The combined (federal, state, local) top corporate income tax rate in the United States is 39.2% (average for all states). It's the highest in the world. The top rate in Japan is 38%. The top rate in Switzerland is 22%. The top rate in Brazil is 25%. The top rate in Mexico is 30%. The top rate in Canada is 34% (http://www.huffingtonpost.com/2012/03/30/us-corporate-tax-rate_n_1392310.html).
|Section 3: Profit-Maximization (or Loss-Minimization) for a Monopolist|
|Microeconomics - Unit 7|
Monopoly Profit-Maximization by Analyzing a Table
Consider the following table with cost and revenue data for a hypothetical monopolist:
Problem: What are the profit-maximizing output and price for the above monopolist? What is the profit at this output? What is the average profit at this output?
Solution: Like the purely competitive firm, a monopolist maximizes profits at the quantity where marginal cost and marginal revenue are equal, or where marginal cost comes closest to marginal revenue, as long as marginal cost does not exceed marginal revenue, marginal cost is not falling, and price exceeds average variable cost.
Applying the profit-maximizing rule, we conclude that the firm maximizes profits at
Monopoly Profit-Maximization by Analyzing a Graph
The graph below indicates that at output Qpm, marginal cost equals marginal revenue in the upward sloping portion of the marginal cost curve. At this output, the price is Ppm. For a monopolist, the marginal revenue curve and the demand (price) curve are different. Therefore, marginal revenue and price at the profit-maximizing output are different. From the MC=MR point, go straight up to the demand curve in order to identify the profit-maximizing price. This price is greater than the firm's average variable cost, so the company will not need to shut down. The price is also greater than the firm's average total cost, so the company is making an economic (above-normal) profit. Because there are barriers to entry into this industry, it is possible that the firm can continue to make economic profits in the long run, as well.
|Last Updated on Monday, 12 January 2015 19:22|