Suppose a Firm Faces the Demand Function Q = 800

question 24

Multiple Choice

Suppose a firm faces the demand function q = 800 - 4P. The firm's total production costs are given by MC(q) = 9.5q + q². If the firm cannot price discriminate, the deadweight loss is $____.

• A) 2
• B) 1.97
• C) 1.85
• D) 1.45

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Definitions:

Signaling Mechanism

A method through which parties communicate information indirectly or directly to influence perceptions and decisions of others, often used in markets and negotiations.

Insurance Policy

A contract between an insurer and policyholder specifying coverage terms, including the risks insured against, the duration of coverage, and the amount of premiums.

Low Risk

Pertaining to situations, investments, or activities that have a minimal chance of negative outcomes or losses.

High Deductible

Refers to health insurance plans with higher deductible amounts, meaning the insured must pay more out-of-pocket before insurance coverage starts.