12. The demand and cost data for some industry are shown to the right. The curve labeled MC,S is the Supply curve if the industry is perfectly competitive, or the Marginal Cost curve for the same industry if it is a monopoly. If this industry produces and sells the allocatively efficient amount of output, total expenditure on this product will be $144 million.

   Producing the allocatively efficient level of output means producing where Price = Marginal Cost, or where the marginal cost curve intersects the demand curve. This occurs at 12 million units of output. To sell this amount the price must be $12, so total expenditure is $12 x 12 million = $144 million. This is shown as the green area to the right.

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