Refer to Scenario 13

question 339

Multiple Choice

Refer to Scenario 13.2 below to answer the question(s) that follow.
SCENARIO 13.2: The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P=55-0.01Q, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR=55-0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheria. It has a constant average and marginal cost of $5 for providing cable service to each household.
-Refer to Scenario 13.2. At what level of output (number of households) is Fun Cable Company's total revenue maximized?

• A) 2,500
• B) 2,750
• C) 5,000
• D) Indeterminate from the given information.

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Definitions:

Equity

The value of an owner's interest in a property, equal to the property's value minus the amount of existing liens.

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The total amount of money that a company owes to creditors, including loans, bonds, and other financial liabilities.

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Financial derivatives that give the holder the right, but not the obligation, to sell a specific amount of a security at a specified price within a specified time period.

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The stock that is the basis for a particular derivative instrument, such as an option.