That's because the greenĬurve, the total revenue, it's slope is larger But what we see what's going on is, as we increase the quantity over here, these curves are gettingįurther and further apart. For this quantity right over here, your economic profit would be represented by the height of this littleīar between these two curves. Total opportunity cost, that gives you your economic profit. The difference between your total revenue and your Your total revenue, so for a given quantity, Total opportunity costs, that's total opportunity cost and the difference between Paying money for explicitly and the implicit opportunity costs. So this is total opportunity cost, both the implicit, both the explicit, the ones that you're actually In terms of economic profit and when we're talking about total cost, we're talking about opportunity cost. This is kind of one, I guess, remember, you should view it We're talking costs and profit in an economics class, like Even from this diagram, you can actually start to visually see economic profit. More and more units, the variable costs start Out here, where we have very few units, where we have zero units, all What our costs look like, so let me draw our total cost curve. If we're gonna maximize profit, we need to think about Our marginal revenue curve, slope of the total revenue.
Sloping even more steep, even more steep, and even more steep. Going down and down and down, it's positive, then it becomes zero, and then it actually becomes It's still positive, less deep, less deep, and then it becomes zero right over there and then it starts going negative. Intersects the vertical axis right over there, but then it keeps going lower, the slope becomes a little lessĭeep, less deep, less deep. The exact same value as where the demand curve We've seen before, when you start here, you have a very high, positive slope and we've seen in other videos it actually ends up being Remember, the marginal revenue just says if I increase my quantity by a little bit, how much am I increasing my total revenue? So that's essentially the slope, the slope of the total revenueĬurve at any given point, or you can think of it as the Revenue, we can think about what the marginal revenue would look like. There'll be some maximum point and then it'll start going down again, so our total revenue would Quantity from this point, our total revenue will keep We've done this in other videos, but then as we increase If we produce a bunch, but weĭon't charge anything for it, and that's this point right over here, our total revenue will also be zero. So if we pick a quantity, if we don't produce anything, we're not going to generate any revenue, so our total revenue will be zero. We have a monopoly, we have a monopoly in this market. Over here we can actually plot total revenue as a function
Just dollars per unit, it's absolute level of dollars. We still have quantity in the horizontal axis, but the vertical axis isn't In the context of demand, that's price, and this is quantity over here.
This axis right here is dollars per unit. That is demand and I'm going to assume that it is a linear demand curve. Industry that we are in, the demand curve looks Of what we've learned about monopolies and, in the process, get a better understanding for some of the graphical representations, which we have talked about in the past, but I wanna put it all Want to do in this video is review a little bit
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