Answer Happy

Consider a market where -There is ONE FIRM. -The firm experiences a downward-sloping linear demand curve. -The firm (on both graphs) will have initially falling, then rising, marginal costs [no not draw any FC/AC yet!]. *draw two graphs side by side with identical Demand, Marginal Revenue, and Marginal Cost Curves a. Draw an initial graph (left graph) with NO Fixed Costs in such a way that this firm is shown to be experiencing some small level of profit. Identify the firms Profit-Maximizing Price (Pm) and Quantity (Qm) along with the Deadweight Loss from this Monopoly b. On the right graph, now include a LARGE level of FIXED COSTS (AC Exceeds MC by a decreasing level as Q increases). Draw this firms outcome if the SAME PRICE you established on the left graph. C. Describe the tradeoff for society between these two situations. What would be the natural outcomes and what are possible policy outcomes for either/both situation.