Need Help Question 3: Monopoly graph. Do parts a, b., cDraw the short-run ATC, AVC, MC, MR and Demand graphs for a monopoly market. In eachpart, show Total Cost (TC), Total Revenue (TR), shade the profit or loss. Clearly label Q for theequilibrium quantity point and P for market price point.a. Draw a profit situationb. Draw a loss (not shutdown) situationc. Draw a monopoly and perfectly competitive industry on the same graph space. Onlyshow equilibrium quantity and price of monopoly (Qm and Pm) and quantity and pricefor a perfect competition situation denoted as (Qpc and Ppc). You do not need to identifyTR, TC or shade the profit in this graph.

Answer: (a). In the case of a profit situation, the ATC at equilibrium will be below the equilibrium price level. Graphical presentation: According to the above figure, the x-axis measures the quantity and the y-axis measures the price, costs, and revenue. The monopolist firm will maximize its profit where the marginal revenue curve intersects the marginal cost curve. The equilibrium occurs at point E. The corresponding price on the demand curve (D) will be the equilibrium price. The corresponding quantity Q is the equilibrium quantity. The profit is shown in yellow. TR=area PBQOTC=area ACQOProfit=PBCAPrice=OPQuantity=OQ (b). In case of loss but not a shutdown situation, the ATC at equilibrium will be greater than the price but the AVC will be lower than the equilibrium price. Graphical presentation: According to the above figure, the equilibrium price charged by the firm is P but the ATC at equilibrium is A. Since A is greater than P the firm is earning a loss equal to the pink area. The firm will not shut down because it is still covering the AVC. At equilibrium, AVC is below the price. TR=area PCQOTC=area ABQOLoss=ABCPPrice=OPQuantity=OQ(c). According to the above figure, the equilibrium in the monopoly market occurs at point E whereas the equilibrium in a perfectly competitive market occurs at point F.