Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAP. 9] PRICE AND OUTPUT UNDER PURE MONOPOLY 227
Table 9.12
Q 1 2 3 4 5
SMC 1 ($) 3 4 7 11 15
SMC 2 ($) 5 7 9 13 17
(a) Table 9.13
P ($) Q TR ($) MR ($) SMC 1 ($) SMC 2 ($) S SMC ($)
17 0 0 .. .. .. ..
16 1 16 16 3 5 3
15 2 30 14 4 7 4
14 3 42 12 7 9 5
13 4 52 10 11 13 7
12 5 60 8 15 17 7
11 6 66 6 P P 9
10 7 70 4 P P 11
9 8 72 2 P P 13
To be noted is that the SMC 1 and SMC 2 values are given in this problem (and are plotted in Fig. 9-15) at
various levels of output, while the MR values as usual refer to (and thus are plotted at) the midpoint
between consecutive levels of output.
In Fig. 9-15, the P SMC curve is obtained by summing horizontally the SMC 1 , and the SMC 2 curves. The
P SMC curve shows the monopolist’s minimum SMC for producing each additional unit of the commodity.
Thus the monopolist should produce the first and second units in plant 1 (at an SMC of $3 and $4, respectively),
the third unit in plant 2 (at an SMC of $5), the fourth and fifth units in plant 1 and plant 2 (one unit in each plant,
at a SMC of $7), etc. The best level of output for this monopolist is five units and is given by the point where
the P SMC curve intersects the MR curve from below.
Fig. 9-15
(b)
The multiplant monopolist minimizes STC at the best level of output when the last unit produced in each plant
has the same SMC. In the present case, the monopolist should distribute the best level of output between the
two plants in such a way that SMC 1 ¼ SMC 2 ¼ P SMC ¼ MR. Thus the monopolist should produce three of
the five units in plant 1 and the remaining two units in plant 2 (see Table 9.13 and Fig. 9-15). Any other