10.1 A Single-Price Monopolist

We look first at a monopolist that charges a single price for its product.
This firm’s profits, like those of all firms, will depend on the relationship
between its costs and its revenues.

Revenue Concepts for a Monopolist

We saw in Chapter 7 that the shape of a firm’s short-run cost curves
arises from the conditions of production rather than from the market
structure in which the firm operates. The same forces that lead perfectly
competitive firms to have U-shaped cost curves apply equally to
monopolists. Therefore, we do not need to introduce any new cost
concepts to analyze a monopoly firm—everything we saw in Chapter
applies equally to firms in all market structures. We can therefore focus
our attention on a monopolist’s revenues.

Because a monopolist is the sole producer of the product that it sells, the
demand curve it faces is simply the market demand curve for that
product. The market demand curve, which shows the total quantity that
buyers want to purchase at each price, also shows the quantity that the
monopolist will be able to sell at each price.

Unlike a perfectly competitive firm, a monopolist faces a negatively sloped demand curve.

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