Table 17-3 Imagine a Small Town in a Remote Area Where Only

question 22

Multiple Choice

Table 17-3
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:
-Refer to Table 17-3. Suppose that Maria and Miguel work together in order to operate as a profit-maximizing monopolist. How many gallons of milk will be produced and sold?

• A)5 gallons
• B)6 gallons
• C)7 gallons
• D)8 gallons

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Definitions:

Required Rate Of Return

This is the minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular project or investment.

Dividends

Profits distributed by a corporation to its shareholders, often as a share of the company's earnings.

Required Return

Required return is the minimum annual percentage earned by an investment that will induce individuals or companies to put their money into this investment, factoring in the risk involved.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend, indicating the steady increase in dividends paid out to shareholders over time.