Table 16-1
the Table Below Shows the Total Demand for Viewing

question 173

Multiple Choice

Table 16-1
The table below shows the total demand for viewing a rare penguin species at a local reserve.Ecotour companies have to build discreet viewing hides for tourists to view the penguins.Each ecotour company has to pay a fixed fee of $5000 for the right to build on the reserve.Assume that hides can be supplied to tourists at zero marginal cost.Tickets are sold to tourists to use the viewing hides. $\begin{array}{|c|c|}\hline \text { Quantity (Visits) } & \text { Price(\$ ticket) } \\\hline 0 & 48 \\\hline 2000 & 36 \\\hline 4000 & 24 \\\hline 6000 & 12 \\\hline 8000 & 8 \\\hline 10000 & 4 \\\hline 12000 & 0 \\\hline\end{array}$ $\begin{array}{|c|c|c|}\hline \text { Quantity (Visits) } & \text { Price(\$ ticket) } & \text { Revenue } \\\hline 0 & 12 & 0 \\\hline 1000 & 10 & 10 \mathrm{k} \\\hline 2000 & 8 & 16 \mathrm{k} \\\hline 3000 & 6 & 18 \mathrm{k} \\\hline 4000 & 4 & 16 \mathrm{k} \\\hline 5000 & 2 & 10 \mathrm{k} \\\hline 6000 & 0 & 0 \\\hline\end{array}$ Any firm can change tickets by steps of 500 only.Any 500 step of quantity is assumed to be sold at the midpoint of the two prices (eg.3500 tickets would be sold for $5)
-Refer to Table 16-1.Assume that there are two profit-maximising ecotourist companies operating in this market.Further assume that they are able to collude on the price of the tickets they sell.As part of their collusive agreement, they decide to take an equal share of the market.How much profit will each company make?

• A)$18 000
• B)$16 000
• C)$9000
• D)$4500

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in a public market.

Historical Cost

The original financial value of an asset or investment at the time of its acquisition.

GAAP

The set of accounting principles, standards, and procedures that companies use to compile their financial statements. GAAP is used to ensure consistency and comparability across organizations.

Debt-For-Debt

A restructuring process where a company replaces or swaps one form of debt with another, like changing the terms or the type of loan.