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?