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.

---

Definitions:

Sunk Costs

Expenses that have already been incurred and cannot be recovered.

Lack

The state of being without something or not having enough of it.

Understanding

The process of comprehending or grasping the meaning, significance, or nature of something.

Minimize Losses

Minimizing losses involves strategies or actions taken by individuals or businesses to reduce the amount of money or resources lost.