Suppose a monopoly is producing its profit-maximizing output ...

[rmenurse]

Suppose a monopoly is producing its profit-maximizing output level. Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output. As a result the monopoly's profit will fall.
 
  Indicate whether the statement is true or false

Question 2

Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Xenophone provides cable service a credible threat?
 
  A) No, because Gigacom will lose 4.5 million in profits if it carries out its threat.
  B) Yes, Xenophone stands to lose 3 million in profit.
  C) Yes, because Gigacom's DSL service will drive Xenophone out of business.
  D) No, because as a second mover, it has no choice but to abide by the choices of the first mover.

[Tonyam972]

Answer to Question 1

TRUE

Answer to Question 2

A