A monopolist, having total control over the level of output it produces and the price it charges, will generally be interested in maximizing its profits. But what if a firm decides that it is revenues that should be maximized instead?
This lesson will examine the profit maximization rule as it applies to a pure monopolist, and introduce the revenue maximization rule, which tells a monopolist the quantity it should produce at in order to earn the maximum level of revenues possible. We will examine the level of economic profits earned at one level compared to the other. Additionally, we will look at the price elasticity of demand for a monopolist’s product by revisiting the total revenue test of elasticity.