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

question 30

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:

Perception

The process of recognizing, organizing, and interpreting sensory information in order to represent and understand the environment.

Sense Organs

Specialized structures in the body that provide organisms the ability to process and respond to external stimuli.

Sensations

The process of detecting physical stimuli from the environment and converting them into neural signals.

Neural Signals

The electrical and chemical signals transmitted by neurons to communicate with each other or with muscles.