... be noted that for a monopolist, MR is not equal to price. As stated above, if a monopolist wants to increase output, it must lower price as it faces a downward sloping demand curve. This fall in price is for all units sold and consequently, if output is increased by a single unit, the rise in revenue is by a smaller quantity than MR. The profit of the firm is represented by the shaded rectangle in the diagram above; this is the difference between total revenues and total costs. Where a market is dominated by a monopolist, the firm uses its advantage to raise its producer surplus and reduce consumer surplus. As a consequence, there are potential abnormal profits to be made, as well as a welfare loss to society. The welfare loss is known as the deadweight loss and is represented by the shaded triangle on the diagram. This comes about ...

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