11.16. Suppose a monopolist faces the market demand function P ! a " bQ. Its marginal cost is given by MC !

c # eQ. Assume that a % c and 2b # e % 0.

a) Derive an expression for the monopolist’s optimal quantity and price in terms of

a, b,

c, and e.

b) Show that an increase in c (which corresponds to an upward parallel shift in marginal cost) or a decrease in a (which corresponds to a leftward parallel shift in demand) must decrease the equilibrium quantity of output.

c) Show that when e & 0, an increase in a must increase the equilibrium price.