Multiple Choice
Scenario: Tobac Co. is a monopolist in cigarette market in Nicotiana Republic where the U.S. dollar is used as its official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $) . Also, you should draw in the marginal revenue curve.
-Refer to the scenario above.When Tobac Co.'s profit is maximized,the deadweight loss is ________.
A) $140.5 million
B) $125 million
C) $112.5 million
D) $100 million
Correct Answer:
Verified
Correct Answer:
Verified
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