This lesson supports the Theory of the Firm section of the Advanced Placement Microeconomics curriculum. Students will learn in this lesson that the profit-maximization rules for the monopoly are the same as they are for a perfectly competitive firm but the monopoly will produce a smaller output than society would like it to produce.
This lesson appears as Lesson 5 from Unit 3: The Theory of the Firm in CEE's Advanced Placement Economics (4th Edition).
- Examine the demand, average revenue, marginal revenue, and total revenue functions of a monopoly.
- Explain why price is higher than marginal revenue for a monopoly.
- Explain the rules a monopoly uses to maximize its total profit.
- Draw graphs of a monopoly and identify its optimal output, price, and total profit.
- Discuss the barriers to entry that keep out other firms.
- Compare monopoly to perfect competition in terms of output, price, total profit, consumer surplus, producer surplus, and total welfare.
- Explain why price discrimination will increase the total profit of a monopoly.
- Discuss three pricing plans for the regulation of a natural monopoly.
Please refer to the Monopoly, Teacher Lesson.
Students complete Activity 3-15 from the Student Resource Manual, Comparing Perfect Competition and Monopoly.
Not available for this lesson.
Please refer to Monopoly, Student Resource Manual.