Question

• Assume Acme Corporation is a typical monopoly: o Construct a graph illustrating Acme's average and marginal cost curves and the demand curve facing it. Identify profit maximizing output and price, total revenues, total costs, and total profits. • Assume the economy moves into a recession and the demand for Acme's product falls. On the same graph, show the effect of the recession on equilibrium price, output, and profits. Your response should be one graph and at least 75 words (1 paragraph) that includes an explanation for the graph.

Answer 1

A monopoly would Set MC2 MR for Profit masurizalich so if it will produce Q 2500 units at a Price of pz 70 to a mo MR soo 4oo 1000 TR TC = - area ABCD aurea FELD Total profit = area ABES AtaQm Profils max when MRMC Monopoly always charges on the danand curre Initial 0 ažmpo MP Porful és max when MR a Mc Afar Prrie risi uby Qiblem rizmo unky 2 Q2 b c MR2 2m Pricespi Price= p luenm = OPIXOQ TR = 0 P2 XOQL Cost = OCX OQI ть з осх OG Profut 2 (P-C) Qi Profit (P2-C) Qr Decrear in demand will dereas the nomopoly prices and quantity which will ducreax monopoly Profit