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7.1.2 Assume that you are a manager of a pure monopoly. Use supply and demand analysis...

7.1.2 Assume that you are a manager of a pure monopoly. Use supply and demand analysis to determine how one of the following changes will affect your product output and price: (a) your firm doubles its output. (b) The price of a complementary good increases. (c) Industry demand declines. (d) Another big firm enters the industry. (e) Improvements in management lower your production costs by 20%.

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Answer #1

Monopoly Market is characterised by the single seller and firm is price maker. Fall in demand may lead to change in quantity and price. or one of these.

Following shall be diagram:

Before fall in demand, equilibrium quantity and Price are Q1 and P1 respectively. After fall in demand for good in industry demand curve shifts to left and new equilibrium is established where equilibrium price falls to P2 and Q remains same.

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