A Firm with Market Power Faces the Demand Function Q

question 87

Multiple Choice

A firm with market power faces the demand function q = 150 - 10P. The firm's marginal cost function is MC(q) = 2 + 0.1q. If the firm establishes a block-pricing structure with two prices, the higher price that the firm will use to maximize producer surplus is $____.

• A) 9.76
• B) 8.63
• C) 7.45
• D) 6.42

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Definitions:

Collection Float

The time gap between when a check is deposited and when the funds are available in the recipient's account, affecting the cash flow of businesses.

Cheques

Paper instruments that direct banks to pay a specified amount of money from a person's account to the person in whose name the cheque has been issued.

Daily Interest Rate

The interest rate calculated on a daily basis, often used to compute interest on loans or investments over a short period.

Fee

A charge for a service provided or the right to engage in certain activities or transactions.