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

question 3

Multiple Choice

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 90 - y and its total costs are c(y) = 9y, where prices and costs are measured in dollars. In the past it was not taxed, but now it must pay a tax of 4 dollars per unit of output. After the tax, the monopoly will

• A) increase its price by 4 dollars.
• B) increase its price by 2 dollars.
• C) leave its price constant.
• D) increase its price by 6 dollars.
• E) None of the above.

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Definitions:

Audience Compliance

The degree to which a target audience adheres to or follows the directives, suggestions, or instructions provided by a communicator.

Main Idea

The central or most important concept, point, or message that an author or speaker intends to convey.

Justification

The reasoning behind an action or statement that explains why it is reasonable or necessary.

Demanding Tone

A manner of speaking or writing that expresses a firm expectation that instructions will be followed or needs will be met.