Winslow Carpet Produces and Sells Berber Carpet by the Yard

question 110

Multiple Choice

Winslow Carpet produces and sells berber carpet by the yard with a variable cost of $16 per yard. Total fixed costs are $280,000. The following chart represents the estimated demand at various price levels. $$\begin{array} { c c } \text { Yards Demanded } & \text { Unit Price } \\57,000 & \$ 25 \\67,500 & \$ 24 \\72,500 & \$ 23 \\86,000 & \$ 21\end{array}$$ Which price will generate the largest profit for Winslow Carpets?

• A) $25
• B) $24
• C) $23
• D) $21

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Definitions:

Rent-Seeking Activities

Practices of gaining economic benefits without contributing to productivity, typically through manipulation of the political environment.

Monopoly Power

The exclusive control by one company over an entire industry or market, allowing it to dictate terms and prices without competition.

Welfare Loss

This refers to the decrease in economic efficiency that occurs when the equilibrium for a good or service is not achieved or is distorted by external intervention, leading to a loss of social surplus.

Consumer Surplus

The discrepancy between the amount consumers are ready to pay for a good or service and the price they end up paying.