Suppose Bruce's Blue Water ('BBW') has a monopoly in the market for water in Bingworld.

Explain why BBW's marginal revenue curve sits below the demand curve it faces. If demand is a downward-sloping straight line, what is the relationship between the slope of the demand curve and that of the marginal revenue curve?

Suppose BBW faces a demand curve of P = 100 - 8Q, where Q is in megalitres. If the monopolist also has a constant marginal cost of $4 per megalitre, what is the price and quantity it will charge to maximise its profit?

If BBW's maximum profit is $168, how much are their fixed costs? Calculate the ATC at the profit maximising quantity and graph the area that represents this maximum profit, including the ATC, MR, MC and Demand curves.