Question # 7:

1. Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm's total revenue and total cost.
2. Draw the demand curve, marginal revenue curve, average total cost curve, and marginal-cost curve for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit.
3. Why the demand curve for a firm operating in monopolistic competition is more elastic compared to the firm operating as a monopoly.