Market Conditions Change for a Monopolist with an Original Marginal

question 142

Multiple Choice

Market conditions change for a monopolist with an original marginal cost of MC = 5 + 10Q. The inverse demand curve rotates from P = 40 - 5Q to P = 47 - 2Q. What happens to the profit-maximizing price following the rotation of the demand curve?

• A) The price falls from $18 to $15.
• B) The price rises from $31.25 to $41.
• C) The price rises from $26 to $34.
• D) The price falls from $18.60 to $11.20.

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Definitions:

Small Firms

Small firms are businesses with a relatively small number of employees, limited revenue, and a localized operational base, often contributing significantly to innovation and employment.

Economies of Scale

Cost benefits that companies gain from their operation size, where the cost for each unit of production typically falls as the scale expands.

Constant Returns to Scale

A situation in production where increasing all inputs by a certain factor results in output increasing by the same factor.

Average Total Cost

The total cost divided by the quantity of output produced; it includes all variable and fixed costs.