CBSE Class 12-commerce Answered

The two conditions for equilibrium in a monopoly market are

i. MC = MR

ii. MC curve cut MR from below

When MC curve cuts MR curve at the point E, which is the equilibrium point of a monopoly market where OQ is the equilibrium output and OP is the equilibrium price.

At this point, MR level is more than the MC. It means that the increase in total revenue from selling an extra unit is greater than the increase in total cost for producing the additional unit. So, the additional unit of output would generate profits. As long as the MR curve lies above the MC curve, the monopolist can produce output.

At the equilibrium level of output Q, the total cost is OQDC and the total revenue is OQBP. Here, TR is greater than TC. Thus, profit of the monopoly market is the rectangle area CDBP.