Suppose That a Monopoly Firm Is Required to Pay a New

question 147

Multiple Choice

Suppose that a monopoly firm is required to pay a new annual license fee just for the privilege of doing business in its fair city; the fee is somewhat less than the economic profit the firm is now earning.In response to the increase in fees, the firm will:

• A) raise its price, but by less than the amount of the license fee.
• B) raise its price by the amount of the license fee.
• C) raise its price by somewhat more than the license fee.
• D) not change its price.