The graph above shows the average cost, marginal cost, demand, and marginal revenue curves for selling computers in a given market. The computer industry is currently perfectly competitive and in equilibrium. Suppose all firms in the industry are taken over by a single firm that establishes a monopoly in the market. Assuming the monopoly maximizes profit,
a. there will be no effect on the price of computers.
b. the price of computers will increase from $400 to $600, and the quantity demanded will fall from 400 to 200 per day.
c. the price of computers will be set equal to the marginal cost of computers.
d. the price of computers will increase from $400 to $600, but there will be no change in quantity demanded.
b. the price of computers will increase from $400 to $600, and the quantity demanded will fall from 400 to 200 per day.
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