Scenario 10.2: A Monopolist Faces the Following Demand Curve, Marginal Revenue Curve

question 59

Multiple Choice

Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
-Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

• A) It increases by $1000.
• B) It decreases by $1000.
• C) It decreases by less than $1000.
• D) It stays the same.

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Definitions:

Equal withdrawals

Regularly scheduled payments of the same amount taken from an investment or savings account.

Compounded monthly

Interest calculation method where interest is added to the principal sum once a month, affecting the total interest accrued over time.

Compounded monthly

Interest calculation method where interest is added to the principal every month, increasing the amount of future interest accruals.

College fund

A sum of money saved or invested over time, designated for covering future college education expenses.