Economic graph showing supply and demand curves, marginal revenue, marginal cost, average total cost, and the economic profit area.

Draw Axes: Start with your vertical axis labeled as Price/Cost and your horizontal axis as Quantity. Demand Curve (D): Draw a downward-sloping line from left to right, labeling it as "D" for Demand. This curve reflects that higher prices result in lower quantities demanded. Marginal Revenue Curve (MR): Plot a downward-sloping line that lies below the demand curve, labeling it as "MR" for Marginal Revenue. This gap indicates that the monopolist must lower the price on all units sold to sell an additional unit. Marginal Cost Curve (MC): Draw a U-shaped curve that slopes upwards, labeling it as "MC" for Marginal Cost. Average Total Cost Curve (ATC): Draw another U-shaped curve that is below the demand curve but above the MC curve at the profit-maximizing quantity, labeling it "ATC" for Average Total Cost. Profit Maximization: Identify the quantity where MR = MC. Mark this intersection and drop a perpendicular line to the demand curve to find your profit-maximizing price, labeling this quantity as Q1. Economic Profit Area: Shade the area between the price on the demand curve and the ATC curve at Q1 to indicate economic profit. See more