The monopoly has a constant level of costs per unit (marginal costs) of 25p (0.25) and your fixed costs per time period are 200. The monopoly believes that in the relatively small market in which you operate that the total demand for olives even at very low prices is unlikely to be higher than 4000 units, and that even the biggest olive lover in the market is only willing to pay a maximum of around 5 per unit.

The rest of this question asks you to draw the monopoly profit maximising diagram building up each curve as you calculate more information.

a)Draw the Market demand curve based on the information above.

b)Find the formulas that expresses that demand curve you have drawn. The formula can be expressed in terms of Q and P.

i.Q =

ii.P =

c)Draw the Marginal Cost curve

d)Draw the Marginal Revenue curve (this is a monopoly)

e)Find the Formula that expresses the Marginal Revenue curve as a function of Quantity (quantity should be in the equation)

f)Find the Profit Maximising output for the monopolist

g)At that output, what is the price?

h)What is the total profit earned by the monopolist?