In the graph below, use black ink to draw the inverse demand curve, p1(y) = 200
Question:
(a) If the monopolist has zero costs, where on this curve will it choose to operate? _____.
(b) Now draw another demand curve that passes through the profit maximizing point and is flatter than the original demand curve. Use a red pen to mark the part of this new demand curve on which the monopolist would choose to operate.
(c) The monopolist would have (larger, smaller) profits at the new demand curve than it had at the original demand curve. _______.
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