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Suppose that a monopoly has fixed costs of $1000 and marginal cost of $100. They face a straight market demand curve that runs from $500 on the price axis to 1000 on the quantity axis.
a. Plot their demand, marginal revenue, marginal cost and average total cost on graph paper.
b. Indicate their profit-maximizing quantity.
c. How much profit will they make at that quantity?
d. Why is this firm a natural monopolist?
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Using the method of Lagrange multipliers to derive Sharifah's demand for brownies and espressos. Explain how many brownies and espressos will Sharifah consume.
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