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Marlboro is a monopolist in the cigarette market in Nicotiana Republic, where the United States dollar is used as the official currency. The firm has
Marlboro is a monopolist in the cigarette market in Nicotiana Republic, where the United States dollar is used as the official currency. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. The firm's demand curve can be expressed as P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $). a. [In a table show Marlboro, the monopolist's demand schedule, total revenue, average revenue, and marginal revenue for prices $2, $4, $6, and $8. (Hint: demand schedule refers to prices and quantity demanded at those prices). (4 marks)] b. [Based on the table created in answer to part (a), show Marlboro's average revenue and marginal revenue curves in a graph. Comment on why the MR curve lies below the AR curve in 100 words or less. (3 marks)] C. [Add marginal cost curve to the graph drawn in part (b). Find out the price and quantity combination of cigarettes packets at which, Marlboro will maximize its profit. (3 Marks)]
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