Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

Refer to the scenario above. Which of the following statements is true of the demand curve that the monopolist faces in the price range of $6 to $10?

A) The demand curve is elastic in the price range. B) The demand curve is inelastic in the price range. C) The demand curve is vertical in the price range. D) The demand curve is upward sloping in the price range.

Sarah's demand for routine medical visits is q = 10 - 0.2p when she is healthy and q = 20 - 0.2p when she is sick. Medical visits cost $50 each if Sarah has no medical insurance. She is sick 20% of the time. Sarah is considering two different insurance plans. One offers free medical visits; the other plan costs less up front but requires that Sarah pay $5 per medical visit. Compare the two plans

in terms of the trade-off between risk and moral hazard. What will be an ideal response?