Question
Demonstrate the answer through a complete graph labeling AC, MC, MR, DWL, Profits, and anything else needed Consider the market for bread. A firm has
Demonstrate the answer through a complete graph labeling AC, MC, MR, DWL, Profits, and anything else needed
Consider the market for bread. A firm has a monopoly in this market. The firm has no fixed costs, and it has constant marginal costs. Thus: TC(Q)=10Q. Draw the firm's AC and MC curves. Copy your figure from a). How does the firm choose a quantity to produce? How does it set the price? Add elements to your figure to illustrate the monopolist's decision. You can assume the firm makes profits. Label the firm's choice of quantity and price. Label profits and DWL too. Briefly explain why there is DWL in the figure above (1b). What is the intuition?
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