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

question 32

Multiple Choice

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 40 - y and its total costs are c(y) = 7y, where prices and costs are measured in dollars.In the past it was not taxed, but now it must pay a tax of 6 dollars per unit of output.After the tax, the monopoly will

• A)increase its price by 6 dollars.
• B)increase its price by 9 dollars.
• C)increase its price by 3 dollars.
• D)leave its price constant.
• E)None of the above.

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Definitions:

Independent Variables

Factors in a study or simulation that are adjusted or classified to assess their impact on outcome measures.

Significance Level

A threshold within which the results of a statistical test are deemed statistically significant, often denoted as alpha (α), with common values like 0.05 or 0.01.

Critical Value

A location within the test distribution measured against the test statistic to determine the rejection of the null hypothesis.

Regression Slope Coefficient

A measure in regression analysis that quantifies the change in the dependent variable for a one unit change in an independent variable.