Question:

Starting from figure 8-6 showing the short-run price and output determination by the monopolist, suppose that the average fixed costs of the monopolist increase by $5 and that its AVC is $6 less than the new ATC at the best level of output. Draw a figure showing the best level of output and price, the amount of profit or loss per unit and in total, and whether it pays for the monopolist to produce.

**special instructions: ATC = AFC + AVC. After AFC increases by $5, ATC will increase by $5 (ATC curve moves up vertically by $5 for every output Q) and MC, D and MR stay the same. The AFC for 500 units is $6, in other words, the TFC is 3,000. You do not need to submit the figure.