|Posted on April 17, 2014 at 9:25 AM|
There is a big difference between maximizing economic profit (Total Revenue - Total Costs) and maximizing total revenue (Price x Quantity). To maximize profit, an unregulated monopolist will produce where the marginal revenue equals the marginal cost (MR=MC) and the price is above that point on the demand curve.
The monopolist will maximize total revenue at a level of output where marginal revenue equals 0 and the price is above that point on the demand curve. The elasticity of demand will equal 1 (unit elastic).
AP Microeconomics Unit 2 Product Markets