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

question 7

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) = 8y, where prices and costs are measured in dollars.In the past it was not taxed, but now it must pay a tax of 8 dollars per unit of output.After the tax, the monopoly will

• A)increase its price by 4 dollars.
• B)leave its price constant.
• C)increase its price by 8 dollars.
• D)increase its price by 12 dollars.
• E)None of the above.

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Definitions:

Pricing Decisions

The process of determining the price at which a company's products or services will be offered to the market, affecting demand, sales, and profitability.

Maximizing Profit

The process of implementing strategies and making decisions that lead to the highest possible profit margin.

Lot Sizing Decisions

The process of determining the optimal order quantity that balances ordering costs with holding costs in inventory management.

Material Cost

The expense incurred in acquiring raw materials and components required for manufacturing a product or providing a service.