A Monopoly Produces Widgets at a Marginal Cost of $10

question 85

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.Suppose fixed costs rise to $400.What happens in the market?

• A) The firm will raise the price.
• B) The firm will shut down immediately.
• C) The firm continues to produce the same output and charge the same price.
• D) The firm will reduce its output and raise price.

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Definitions:

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Governmental bodies responsible for the oversight and administration of specific regulations and laws.

Crisis

A situation or period of intense difficulty, trouble, or danger, which requires immediate remedies or response.

Federal Office

A governmental position or department established by the federal law or constitution, responsible for specific duties at a national level.

Small Businesses

Enterprises characterized by a small number of employees, limited revenue, and relatively smaller scale of operations compared to larger corporations.