quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the

monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal

revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new

profit-maximizing quantity and price. Does the answer make sense to you?

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33. Draw a monopolist’s demand curve, marginal revenue, and marginal cost curves. Identify the

monopolist’s profit-maximizing output level. 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?

9 • Problems 235
236 9 • Problems

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Monopolistic Competition and
Oligopoly

10

FIGURE 10.1 Competing Brands? The laundry detergent market is one that is characterized neither as perfect
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