A Monopoly Produces Widgets at a Marginal Cost of $10

question 49

Multiple Choice

A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs.It faces an inverse demand function given by P = 50 − Q.The demand elasticity of a widget at the monopoly price and quantity is:

• A) −1.5.
• B) −2.
• C) −2.5.
• D) 2.

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Definitions:

Comparative Advantage

A principle that states a country should produce and export goods for which it has a lower opportunity cost compared to other countries.

Allocate Resources

The process of distributing available resources among various projects or business units.

Maximize Output

Involves strategies or actions by a firm to produce as much as possible, often while considering constraints like resources, technology, and market demand.

Comparative Advantage

The capability to produce a particular good or service more efficiently than other producers, allowing for trade benefits.