Scenario 12.2: Suppose a Stream Is Discovered Whose Water Has Remarkable Healing

question 39

Multiple Choice

Scenario 12.2:
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows:
P = 30 - Q
The marginal cost to produce this new drink is $3.
-Refer to Scenario 12.2. What will be the price of this new drink in the long run if the industry is a Stackelberg duopoly?

• A) $3
• B) $9
• C) $12
• D) $13.50
• E) none of the above

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Definitions:

Market Risk

The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize the impact of any single asset's performance on the overall portfolio returns.

Rule Of 70

A quick formula used to estimate the number of years required for an investment or population to double, calculated by dividing 70 by the annual growth rate.

Interest Rate

The cost of borrowing money or the return earned on investments, typically expressed as a percentage of the principal amount.