Assume Acme Corporation is a typical monopoly:

a.Construct a graph illustrating Acme's average and marginal cost curves and the demand curve facing it. Identify profit maximizing output and price, total revenues, total costs, and total profits.

b.Assume the economy moves into a recession and the demand for Acme's product falls. On a separate graph, show the effect of the recession on equilibrium price, output, and profits.

c.Based on your answer, comment on the following statement, indicating whether or not you agree with it: "a monopolist can charge whatever price it wants."