Question 1 (13 pts)

Read the following and use it to answer the following questions:

James owns a factory that produces fuel from bio waste and sells the fuel to the agricultural industry. He holds a patent on this new process he has titled James's Super Fuel. Your answers to the next questions will rely on your interpretation of the type of market. Draw accurately and clearly. Discrepancies in your drawings will result in reductions in your grade. For accurate depictions, feel free to use a larger graph area than the one provided.

 

a. Draw a correctly labeled graph that would represent James's profit maximizing output and price in the industry for his unique product. Be sure to represent all revenue, demand, and relevant cost curves. (4 points for an accurately labeled graph)