A Profit-Maximizing Monopoly Faces an Inverse Demand Function Described by the Equation

question 72

Multiple Choice

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 30 - y and its total costs are c(y) = 5y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 2 dollars per unit of output. After the tax, the monopoly will

• A) increase its price by 3 dollars.
• B) increase its price by 2 dollars.
• C) increase its price by 1 dollars.
• D) leave its price constant.
• E) None of the above.

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Definitions:

Racism

Prejudice, discrimination, or antagonism directed against someone of a different race based on the belief that one's own race is superior.

Judging

Involves forming opinions or conclusions about people or situations, often without all the necessary information.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, often useful but sometimes leading to inaccuracies or biases.

Availability Heuristic

A cognitive heuristic that depends on readily accessible examples in an individual’s mind when assessing a particular topic, idea, strategy, or choice.