Question 1

Instructions: Show all steps for each part of the question below.

The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. Below the graph is the market demand curve.

a.Complete the columns for Total Revenue and Average

b.What level of output should this monopolist produce? Explain how you have arrived at your answers. Hint: State the rule profit maximizing out for a monopolist. Next, show your answers in the graph above?

c.What price should this monopolist charge? Explain how and then show your answers in the graph below.

d.What price and output would prevail if this firm's product were sold price-taking firms in a perfectly competitive market? First the profit maximizing rule for monopolist and the competitor; explain and then show your result using the above graph.