The Inverse Demand Curve for a Firm with Market Power

question 13

Multiple Choice

The inverse demand curve for a firm with market power is P = 60 - Q, and its marginal cost is given by MC = 2Q. If the firm decides to practice first-degree price discrimination, the deadweight loss will:

• A) decrease from $37.50 to $0.
• B) decrease from $45 to $15.
• C) increase from $0 to $65.
• D) increase from $30 to $45.

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Definitions:

Deemed Worthless

A term referring to assets that have become valueless and are recognized as a loss for tax purposes.

Long-Term Loss

A loss realized from the sale of an asset held for more than one year, which can offset long-term capital gains.

Short-Term Loss

A financial loss realized on the sale of an asset held for one year or less, used to offset capital gains and reduce taxable income.

Single Category Average

A measure that represents the average value within a specific, singular category of data.