A Monopolist Finds That a Person's Demand for Its Product

question 20

Multiple Choice

A monopolist finds that a person's demand for its product depends on the person's age.The inverse demand function of someone of age y can be written p = A(y) - q, where A(y) is an increasing function of y.The product cannot be resold from one buyer to another and the monopolist knows the ages of its consumers.If the monopolist maximizes its profits,

• A)older people will pay higher prices and purchase less of this product.
• B)older people will pay higher prices and purchase more of this product.
• C)older people will pay lower prices and purchase more of this product.
• D)everyone will pay the same price but older people will consume more.
• E)None of the above

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the ownership interest of shareholders.

Book Value Per Share

A measure used to gauge a company's financial health, calculated by dividing total shareholder's equity minus preferred equity by the number of outstanding common shares.

Stock Dividend

A payment made to shareholders in the form of additional shares, rather than cash, reflecting the company's decision to reinvest the profit.

Liability

A company's legal financial debts or obligations that arise during the course of business operations.