The Wii Is a Wildly Popular Home Video Game Console

question 43

Multiple Choice

The Wii is a wildly popular home video game console released by Nintendo. The Wii system was first available in the U.S. in November, 2006 and has sold more than 30 million units as of August 2010. The Wii retails for $199. Suppose Ahmed is willing to pay $230, Lana is willing to pay $175, and Bodie is willing to pay $300 for a Wii. What is the value of Lana's consumer surplus?

• A) No consumer surplus is generated because Lana will not buy the Wii.
• B) $249
• C) $225
• D) $24

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Definitions:

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of the company remains the same.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owners' share in the company's assets.

Dividend-to-Earnings Ratio

The dividend-to-earnings ratio indicates what portion of a company's earnings is paid out as dividends to shareholders, reflecting the company's dividend payout policy.

Target Payout Ratio

A firm’s long-term desired dividend–earnings ratio.