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

question 23

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) = 6y, 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 2 dollars.
• B) increase its price by 3 dollars.
• C) increase its price by 1 dollar.
• D) leave its price constant.
• E) None of the above.

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Definitions:

Quasidirectional

Pertains to a tendency or trend that is not strictly linear or unidirectional but suggests a general direction.

Test Statistic

A calculated value used in hypothesis testing that helps to determine whether to reject the null hypothesis.

Pooled Variance

Pooled variance is a method used to estimate the variance of two or more groups by combining their variances, assuming they have the same variance but not necessarily the same mean.

Degrees Of Freedom

The number of independent values or quantities which can vary in an analysis without breaking any constraints.