Suppose a Cell-Phone Service Provider Has Monopoly Rights for a Geographical

question 50

Multiple Choice

Suppose a cell-phone service provider has monopoly rights for a geographical region and is earning monopoly profits.If the government then imposes a lump-sum tax (i.e.,a tax that is independent of the level output) of $X on this firm,the effect is

• A)an increase in consumer surplus due to the tax revenue.
• B)to increase the firm's marginal costs and reduce its profit by $X.
• C)to increase the firm's average costs and reduce its profit by $X.
• D)a reduction in output and an increase in price.
• E)an increase in output and a decrease in price.

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Definitions:

Difference Threshold

The smallest detectable difference between two stimuli or the minimum change in stimulus intensity that can be sensed.

Absolute Threshold

The minimum intensity of stimulus that is required for a person to detect its presence 50% of the time.

Light Bulbs

Devices that produce light from electricity, consisting of a filament that glows when heated by an electric current.

Top-Down Processing

A perceptual process where an individual's expectations or prior knowledge guide the interpretation of sensory information.