You are the manager for a monopoly with costs, demand, and marginal revenue as in the graph at the top on Figure 1.

a. Does the fact that you operate in a monopoly always guarantee that you can achieve higher profits by increasing the price? Explain.

b. Draw the are representing the profits on the top graph on Figure 1.

c. Suppose one of your suppliers just announced an increase in prices for a specific part that your product requires. What should the impact be to each of the curves on the top graph of Figure 1? Explain carefully.

d. Suppose economic conditions change in such a way that the demand curve for your company shifts left.

i. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economic profits.

ii. Draw a demand curve on the bottom graph on Figure 1 such that any further leftward demand shift will cause you to shutdown.

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