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> If the polynomial P is invertible, i.e. has degree 1

Should be degree 0: only constant polynomials are invertible. E.g. x+1 is not invertible, and modding it out doesn't result in the zero ring.

The example is a bit confusing, because $x=x+1$ is equivalent to $0=1$, which has degree 0.

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What's wrong with negative degree monomials?

You mean like $x^{-1} = 1/x$? That's called a rational function[1], but not a polynomial, so it's not an element of the polynomial ring[2]. Of course you can also consider the algebra of rational functions, but this is a field[3] (almost by definition: you make every polynomial invertible), which means that modding out anything other than 0 yields the zero ring[4].

[1] https://en.wikipedia.org/wiki/Rational_function

[2] https://en.wikipedia.org/wiki/Polynomial_ring

[3] https://en.wikipedia.org/wiki/Field_(mathematics)

[4] https://en.wikipedia.org/wiki/Zero_ring

Yes! Fixing

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