A Profit-Maximizing Monopolist Faces a Demand Function Given by Q

question 18

Multiple Choice

A profit-maximizing monopolist faces a demand function given by q = 1000 - 20p, where p is the price of her output in dollars. She has a constant marginal cost of 20 dollars per unit of output. In an effort to induce her to increase her output, the government agrees to pay her a subsidy of $10 for every unit that she produces. She will

• A) increase her price and lower her output.
• B) decrease her price by $5 per unit.
• C) decrease her price by $10 per unit.
• D) decrease her price by more than $10 per unit but by less than $16 per unit.
• E) decrease her price by more than $16 per unit.

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