DVDs Can Be Produced at a Constant Marginal Cost, and Roaring

question 124

Multiple Choice

DVDs can be produced at a constant marginal cost, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at $20 per disk, and the DVD for Schreck 10 is priced at $30 per disk. If the Lerner indices for Rambeau 17 divided by the Lerner index for Schreck 10 equals 0.5, what is the constant marginal cost of producing both DVDs?

• A) MC = $10
• B) MC = $15
• C) MC = $20
• D) MC = $5

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Definitions:

Operating Income

Earnings before interest and taxes (EBIT), an indicator of a company's profitability from its core business activities, excluding non-operating income and expenses.

Break-even Point

The point at which total revenue equals total costs and expenses, resulting in neither profit nor loss.

Dollar Sales

The total value of sales made by a business within a certain period, measured in dollars.

Selling Price

The amount of money for which a product or service is sold to the customer.