A Monopoly Has the Demand Curve Q = 10,000 -

question 14

Multiple Choice

A monopoly has the demand curve q = 10,000 - 100p.Its total cost function is c(q) = 1,000 + 10q.The government plans to tax the monopoly's profits at a rate of 50%.If it does so, the monopoly will

• A)increase its price by 50%.
• B)increase its price by more than 50%.
• C)recover some but not all of the tax it pays by increasing its price.
• D)not change its price or the quantity it sells.
• E)None of the above.

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