A monopoly is a single firm that is the sole producer of
a product. Monopolies are price makers and entry into a monopoly is blocked. Monopolies also engage in nonprice competition.
Short Run Profite-Maximization
Monopolists produce at the MC=MR output. Demand is higher than the ATC so
a profit will be realized.
Short run loss
Loss occurs because the ATC curve is above the demand curve, and the firm is not covering the minimum ATC.
Long run break even
The firm is breaking even because the ATC curve intercepts where MR=MC.
Shortrun Shutdown
A monopoly would shut down because they are incurring large economic
losses. Demand is below the AVC and ATC curve where the ouput level of MR=MC lies.
