Suppose a Cell-Phone Service Provider Has Monopoly Rights for a Geographical

question 50

Multiple Choice

Suppose a cell-phone service provider has monopoly rights for a geographical region and is earning monopoly profits.If the government then imposes a lump-sum tax (i.e.,a tax that is independent of the level output) of $X on this firm,the effect is

• A)an increase in consumer surplus due to the tax revenue.
• B)to increase the firm's marginal costs and reduce its profit by $X.
• C)to increase the firm's average costs and reduce its profit by $X.
• D)a reduction in output and an increase in price.
• E)an increase in output and a decrease in price.

Determine the profit-maximizing strategies for firms in various market conditions.

Analyze the impact of marginal cost and fixed cost on production decisions.

Understand the implications of antitrust laws on market competition and efficiency.

Grasp the concept of Nash equilibrium in the context of non-collusive oligopolies.

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Definitions:

Labor Market

The labor market is a marketplace where employers find workers and workers find jobs, characterized by the supply and demand for labor, influencing employment levels, wages, and working conditions.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole, focusing on aggregate changes in unemployment, GDP, inflation, and economic policies.

Large Firms

Companies or enterprises that operate on a large scale, often having considerable market power and resources.

Economy

The structure of economic activity in a community, a region, a country, a group of countries, or the world