Suppose a Monopoly Faces an Inverse Demand Curve of P

question 37

Multiple Choice

Suppose a monopoly faces an inverse demand curve of P = 6 - Q and has constant marginal cost of 2.If the government is considering legislation that would regulate price to the competitive level, what is the maximum amount the monopoly would spend on (legal) lobbying activities designed to thwart the regulation?

• A)$2.
• B)$4.
• C)$6.
• D)none of the statements associated with this question are correct.

---

Definitions:

Factor Endowments

The quantity and quality of labor, land, and capital that a country possesses, influencing its economic productivity.

Labor

The application of human physical and intellectual labor in the manufacture and provision of goods and services.

Natural Resources

Materials or substances such as minerals, forests, water, and fertile land that exist in nature and can be used for economic gain.

Opportunity Cost

The act of losing possible benefits from other routes when a single path is chosen.