A single firm monopolises the entire market for widgets and can produce at constant average and marginal costs of €10.Originally, the firm faces a market demand curve given by Q=60−P.
a. Calculate the profit-maximising price and quantity for the monopoly. What are the firm’s profits?
b. If the demand curve shifts to Q=45−0.5P determine the new equilibrium. Calculate the firm’s profits.
c. Graph the different situations of parts (a) and (b). Explain why there is no real supply curve for a monopoly.