Which of the following statements is true?
A) If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost.
B) A monopolist will always charge the highest possible price.
C) If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers.
D) Because a monopolist faces no competition, the demand for its product is perfectly inelastic.
Answer: A
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Why are isoquants negatively sloped?
A) Along a single isoquant, the firm can substitute the use of one input for another while holding the total level of output constant. B) Due to the effects of diseconomies of scale. C) Because the farther the isoquant is from the origin, the higher the level of output. D) Because price and quantity demanded are inversely related.
In the process of long-term profit maximization, the business makes decisions under the assumption that it can
A. not change any of its costs. B. change only short-term costs. C. vary all the inputs. D. change only long-term costs.