Question: The following graph shows the demand function for a product in a purely hypothetical country. Currently a large number of small perfectly competitive firms are
The following graph shows the demand function for a product in a purely hypothetical country. Currently a large number of small perfectly competitive firms are producing the product. The marginal cost function shown in the graph is the sum of marginal cost functions the same as supply functions of these perfectly competitive firms. The kings brotherinlaw is the commander in chief of the armed forces as well as the head of the treasury department you know how these things go in that kingdom! The brotherinlaw convinces the president that, for the good of the country, this industry should be run by just one firm and he should be the CEO of that firm. The king totally agrees. Therefore, the brotherinlaw buys out all these firms and establishes a monopoly. In your work, draw the marginal revenue function as a line half way between the vertical axis and the demand function.
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