The Inverse Demand for Shampoo Is Given by P =

question 57

Multiple Choice

The inverse demand for shampoo is given by P = 30 - 0.03Q, where P is the price per bottle in dollars and Q is bottles brought to market in hundreds. There are two manufacturers in the local market. Firm 1's cost function is given by C₁ = 0.05q₁², where q₁ is the number of bottles it brings to market. Firm 2's cost function is given by C₂ = 0.03q₂², where q₂ is the number of bottles it brings to market. The two firms are Cournot competitors who set output so that Q = q₁ + q₂. In equilibrium, the market price is $____.

• A) 21.23
• B) 20.12
• C) 19.18
• D) 17.63

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Definitions:

Indirect Method

A way of reporting net cash flows from operating activities in a cash flow statement by starting with net income and adjusting it for changes in balance sheet items.

Operating Activities

Business activities related to the core functions of a company including production, sales, and delivery of the company’s products and services.

Gain

A financial gain occurs when the selling price of an asset exceeds its purchase price, resulting in a positive difference.

Indirect Method

The indirect method is a way of calculating cash flow from operating activities for the cash flow statement by adjusting net income for changes in non-cash accounts.