Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you?

Figure 9.6

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Dollars ($) 3,000 2,500 2,000 1,500 1,000 500 0 -200 1 2 3 4 Total profit 5 Quantity 6 Marginal cost 7 Average cost Demand Marginal revenue 8 9