Question 1 - Monopoly Basics Suppose that the inverse demand in a given market is: HQ) = A be This market has a mor10polist with the following cost function: C(Q) = 0622 a) Show, for this linear demand curve, that the marginal revenue curve is half of the demand curve (hint: rst write down the revenue function and then calculate the marginal revenue). Graph the marginal revenue and demand curve on the same graph. b) Now we want to look at the elasticities... b.1) Calculate the elasticity of demand. What is the elasticity when Q = U, Q = % and when Q = %? b2) Draw a graph with the demand equation and the marginal revenue. Include the numbers you calculated above at their relevant points and then tell us what happens to the elasticity on all the other points on the demand curve. b.3) You probably noticed that at Q = i the 11sz is equals to zero and so we are maximizing the revenue extracted from the market [do not confuse revenue with profits). Using the elasticity discuss what happens to revenue if from a point to the left Q = 5?) the firm decreases its price. Do the same for a point to the right of Q = 71-3; and for a increase in prices