Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
-Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

Question

Quizplus · Accepted Answer

The monopoly's profit will decrease by $1000 because the license fee is an additional fixed cost that must be subtracted from the total revenue earned. The monopolist will continue to produce at the same level of output and incur the same variable costs, but with the additional fixed fee, profit will decrease.

Scenario 10.2: A Monopolist Faces the Following Demand Curve, Marginal Revenue Curve