Suppose that your company has a monopoly on the souvenir mug business for all residential colleges on campus (i.e. your company is given the exclusive rights to their souvenirs).
a.   Using demand and cost curves, draw a diagram depicting the firm's profit-maximizing price and output level.
b.   Why is marginal revenue less than price for this firm?
c.   On your diagram, show the deadweight loss that occurs because the output level is determined by a monopoly rather than by a competitive market.
d.   What would happen if the residential colleges decided to charge the manufacturer a royalty fee of RM3 per mug?

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