Title
(3) Evaluating Profitability Using the Average/Marginal Approach
Topic Category
Monopoly
Publication Date
2011
Keywords
Monopoly, Total Profits, Average Profits, Profit-Volume Analysis
Abstract
This shows how a graph of revenues and costs can be used to conduct profit-volume analysis. The average/marginal approach is used. The profit maximizing output level is identified, and the associated total revenue and total cost measures are shown. This leads to an evaluation of profitability at the profit maximizing output level. Three outcomes are reviewed: 1) the firm making money, 2) the firm losing money, and 3) the firm breaking even by earning zero profits.
Recommended Citation
Crane, Steven E., "(3) Evaluating Profitability Using the Average/Marginal Approach" (2011). Principles of Microeconomics. Paper 51.
http://epublications.marquette.edu/microecon_learning/51
Run Time
6:38
Primary Discipline
Microeconomics
Skills Delivered
Ability to use average/marginal approach graphs of revenue and cost functions for the monopoly firm to determine the profit situation at the profit maximizing output level.
Rigor Level
2000
Prerequisites
Overview of Market Structure, Perfect Competition Characteristics and Short Run Cost Videos