Let the Inverse Demand Curve for a Monopolist's Product Be

question 36

Multiple Choice

Let the inverse demand curve for a monopolist's product be P = 100 - 2Q and the marginal cost of production be constant at MC = 10. Suppose that the firm considers moving from a uniform pricing strategy to a two-block tariff where the first block provides 15 units at a price of P₁ = $70 and the second block provides an additional 15 units at a price of P₂ = $40. How much does the monopolist's profit rise with this scheme?

• A) $225
• B) $337.50
• C) $450.50
• D) $512

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Definitions:

Population Parameter

A numerical value that represents a characteristic of an entire population, such as its mean or standard deviation.

Standard Error

The standard deviation of the sampling distribution of a statistic, most commonly the mean; it is used to estimate the accuracy of a sample mean compared to the population mean.

Confidence Interval

A range of values, derived from sample statistics, that is believed to contain the true value of a population parameter with a certain level of confidence.

Mean

Refers to the arithmetic average of a dataset, computed as the sum of all the numerical values divided by the count of values in the dataset.