Suppose the patent held by the monopoly in problem 3 expires and many competitors enter the market. Which of the following will be eliminated in the long run due to monopolistic competition?

a. Deadweight loss

b. Profit

c. The separation of the marginal revenue curve and the demand curve

Draw a new graph for your firm as it might look in the long run. Label the profit-maximizing price and quantity as and P_MC and Q_MC.

Data from problem 3

Suppose a patent makes you the only seller of a new cold remedy. Draw a graph for your monopoly, assuming it resembles a typical monopoly. Include the curves for demand, marginal revenue, marginal cost, and average total cost. Shade and label the areas that represent profit and deadweight loss. Label the profit-maximizing price and quantity as P_M and Q_M.