The effectiveness of market forces to keep the price down.

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Chapter 13, Problem 9DQ

To determine

The effectiveness of market forces to keep the price down.

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Draw a monopolist’s demand curve, marginal revenue, and marginal cost curves. Identify the monopolist’s profit-maximizing output level, let’s call them Q0 and P0. Now, think about a slightly higher level of output (say Q0 + 1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?

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