If a Monopolist Produces Output in More Than One Plant

question 40

Multiple Choice

If a monopolist produces output in more than one plant, output should be distributed among those plants so that:

• A) the total costs of production are the same in each plant
• B) the marginal revenue of producing the last unit of output in each plant is the same for all plants
• C) the average total cost of producing the last unit of output in each plant is the same for all plants
• D) the average revenue of producing the last unit of output in each plant is the same for all plants

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Definitions:

Residual Value

The estimated amount that an asset will be worth at the end of its useful life.

Double-Declining-Balance Method

A method of accelerated depreciation which doubles the straight-line depreciation rate and applies it to the asset's remaining book value each year.

Depreciation

The method of distributing the expense of a physical asset over its lifespan to represent its depreciation over time.

Residual Value

The estimated salvage value of an asset at the end of its useful life, representing what it could be sold for or would be worth at that future time.