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Determining the Monopolist’s Profit-Maximizing Output and Price A monopolist maximizes profit by producing at an output level at which marginal revenue (MR) equals marginal cost (MC) but will charge a price as determined by the firm’s demand curve. A firm that is the sole producer of a product and has zero costs will want to maximize its total revenue. On a graph, it would try to maximize the size of the total revenue rectangle on the left. To maximize revenue it would produce at an output level where the marginal revenue curve crosses the horizontal axis of the graph or where MR = 0. The price it charges is the price on the demand curve at that level of output. When a monopolist produces a product and has to deal with production costs, it wants to maximize profits not revenue. Because profits are total revenue minus total costs, the monopolist will produce up to the point at which marginal revenue (MR) = marginal cost (MC) and find the price at that level on the demand curve. On the left the firm with costs produces at Q*m because at that point, additional sales begin adding more to costs than they do to revenue. The market price at that output is P*m so price is greater than marginal revenue. The economic intuition for choosing to produce at the point where MR = MC is this: as long as the firm can add more to total revenue from an additional unit than is subtracted from total revenue by its production, the firm will produce it. After the point where MR = MC, the additional cost of the marginal unit is greater than the revenue it brings in.