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Grafting Curves

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Here is an example of some of the problems I am having difficulty with. (This is not an actual homework problem, but understanding the concept of this example would help me to do the rest of them correctly).

A monopolist with a straight-line demand curve finds that it can sell 2 units at $12.00 each or 12 units at $2.00 each. Its fixed cost is $20.00 and its marginal cost is constant at $3.00 per unit. Please draw the MC, ATC, MR and demand curve and explain at what output level would this monopolist produce? What output level would a perfectly competitive firm produce?

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Solution Summary

The solution provides explanations and interpretations of the question given as well as drawing a demand curve.

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