Using agraph, explain why a firm might not want to spend A onadvertising, even though it shifts thefirm's demand curve to the right.

In the figure to theright, let D1 and MR1 be demand and marginal revenue before advertising. Assume the monopoly has a constant marginal cost with no fixed cost such that MR1=AC1. Then, suppose the monopoly advertises and that the advertising shifts demand and marginal revenue to D2 and MR2.

Assume advertising is a marginalcost, such that the new marginal cost after advertising is still a constant and still equals a new average cost.

Using the line drawing tool, graph the marginal costcurve, reflecting the cost of theadvertising, such that the monopoly breaks even from advertising. Label this curve 'MC2.'

Carefully follow the instructionsabove, and only draw the required objects.

30- 28- 26- 24- 22- p, $ per unit MC = AC MR MR2 D D2 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Q, Quantity