How does a monopolist choose Q and P when selling more lowers the price on earlier units?
Choose Q from MR=MC, read P from demand, and allocate across plants by equalizing MC.
Follow the cause and effect
Derive TR=P(Q)Q and MR from inverse demand.
Set MR=MC for Qm, then substitute into demand for Pm.
With multiple plants set MC1=MC2=MR and sum qi=Q.
The model you are using
Conditions for this model
Single uniform-price seller, no policy intervention in the example, linear demand and constant MC.
The exam trap
Do not impose P=MC as under competition, and explain rather than merely label the multi-plant condition.
Connect the reasoning to the graph
What changes
- MR lies below downward demand; project upward from MR=MC to read price on demand.
What stays fixed
Single uniform-price seller, no policy intervention in the example, linear demand and constant MC.
Keep these conditions throughout the comparison; change only what the case above specifies.
What to inspect
With multiple plants set MC1=MC2=MR and sum qi=Q.
Compare before and after, and locate the conclusion on the graph.
5 MINUTES · TRANSFER THE IDEA
Can you explain it without the lesson?
Use the elasticity markup rule and explain why demand must be elastic at an interior optimum.