Monopolistic competition and oligopoly firms that also face negatively-sloped demand curves generate comparable total revenue. The changing slope of this curve is due to the changing price.Īlthough this total revenue curve is based on the production activity of Feet-First Pharmaceutical, a well-known monopoly firm, it could also be for any firm with market control. Should it sell 12 ounces (at $4.50 per ounce), then it receives only $54 of total revenue.įor Feet-First Pharmaceutical the total revenue 'curve' actually is a 'curve.' The slope of this curve falls as more output is produced, eventually reaching a peak, then becoming negative. Alternatively, if it sells 10 ounces (at $5.50 per ounce), then it receives $55 of total revenue. This curve indicates that if Feet-First Pharmaceutical sells 1 ounce of medicine (at $10 per ounce), then it receives $10 of total revenue. Although quantity on this particular graph stops at 12 ounces of medicine, it could go higher. The vertical axis measures total revenue and the horizontal axis measures the quantity of output (ounces of medicine). Larger quantities of output are only possible with lower prices. Key to this curve is that Feet-First Pharmaceutical is a monopoly provider of a drug called Amblathan-Plus and thus faces a negatively-sloped demand curve.

The total revenue curve for Feet-First Pharmaceutical is displayed in the exhibit to the right. The slope of this total revenue curve is marginal revenue. For firms with more market control, especially monopoly, the total revenue curve is 'hump shaped,' increasing, reaching a peak, then declining. For a perfectly competitive firm with no market control, the total revenue curve is a straight line. The total revenue curve reflects the degree of market control held by a firm. If a monopoly wants to sell a larger quantity, then it must lower the price. As the only firm in the market, monopoly is a price maker and has extensive market control, facing a negatively-sloped demand curve. Monopoly is a market structure with a single firm selling a unique good. The slope of the total revenue curve is marginal revenue. It is combined with a monopoly firm's total cost curve to determine economic profit and the profit maximizing level of production. TOTAL REVENUE CURVE, MONOPOLY: A curve that graphically represents the relation between the total revenue received by a monopoly firm for selling its output and the quantity of output sold. While the WPI is no longer available, the family of producer price indexes provides a close counterpart in the Finished Goods Price Index. The change to Producer Price Index in 1978 reflected, as much as a name change, a change in focus of this index away from the limited wholesaler-to-retailer transaction to encompass all stages of production. The WPI was first published in 1902, and was one of the more important economic indicators available to policy makers until it was replaced by the PPI in 1978. The Wholesale Price Index, abbreviated WPI, was the forerunner of the modern Producer Price Index (PPI).

WHOLESALE PRICE INDEX: An index of the prices paid by retail stores for the products they would ultimately resell to consumers. AmosWEB means Economics with a Touch of Whimsy!

Monopoly economics graph