In a Market with the Inverse Demand Curve P =

question 19

Multiple Choice

In a market with the inverse demand curve P = 10 - Q, Brand X is a monopolist with no fixed costs and with a marginal cost of $2.If marginal cost rises to $4, by how much will the price of Brand X rise?

• A)$2.
• B)$1.
• C)$3.
• D)$0; the firm is already charging the monopoly price.
• E)None of the above.

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Definitions:

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Old Equipment

Refers to machinery or technology that has become outdated or has surpassed its effective service life but may still be in use.

Salvage Value

The projected remaining worth of an asset once it has reached the end of its operational lifespan.

Internal Rate

Refers to the internal rate of return (IRR), which is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.