Scenario: Tobac Co

question 53

Multiple Choice

Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $) . Also, you should draw in the marginal revenue curve.

-Refer to the scenario above.When the quantity sold goes up from 50 million to 100 million packs of cigarettes,the price effect on the firm's revenue is ________ and the quantity effect is ________.

• A) -$100 million; $100 million
• B) -$100 million; $200 million
• C) $100 million; -$100 million
• D) $100 million; -$200 million

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Definitions:

Asch

Refers to Solomon Asch, a psychologist known for his research on conformity, including famous experiments on group pressure and individual judgment.

Line-Judging Task

A cognitive task used in research to study perceptual or judgmental biases by asking participants to make decisions about visual lines.

Social Influence

The effect that individuals or groups can have on the beliefs, feelings, and actions of others, leading to changes in attitudes or behaviors.

Asch's Experiments

Studies conducted by Solomon Asch that demonstrated the power of conformity in groups, where individuals often go along with a group's consensus even when it is clearly incorrect.