-Consider the Straight-Line Demand Curve Illustrated in the Above Figure

question 110

Multiple Choice

-Consider the straight-line demand curve illustrated in the above figure. At what price is total revenue maximized?

• A) at a price of $8
• B) at a price of $6
• C) at a price of $4
• D) More information is needed to determine the price at which total revenue is maximized.

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Definitions:

Economic Value Added (EVA)

A method used to measure a firm’s true profitability. EVA is found by taking the firm’s after-tax operating profit and subtracting the annual cost of all the capital a firm uses. If the firm generates a positive EVA, its management has created value for its shareholders. If the EVA is negative, management has destroyed shareholder value.

Net Operating Profit After Taxes (NOPAT)

A company's operating profit after adjusting for taxes, useful for comparing the profitability of businesses.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to assess the cost of funding new projects.

Taxable Income

The portion of an individual's or company's income used to determine how much tax will be owed to the federal, state, and/or municipal governments.