Let the Inverse Demand Curve for a Monopolist's Product Be $P = 100 - 2 Q$

question 63

Multiple Choice

Let the inverse demand curve for a monopolist's product be $P = 100 - 2 Q$ and the marginal cost of production be constant at $M C = 10$ . Which of the following is the optimal two-block tariff for the firm?

• A) \(P _ { 1 } = \$ 70 ; Q _ { 1 } = 15 ; P _ { 2 } = \$ 40 ; Q _ { 2 } = 30\)
• B) \(P _ { I } = \$ 60 ; Q _ { 1 } = 20 ; P _ { 2 } = \$ 30 ; Q _ { 2 } = 15\)
• C) \(P _ { 1 } = \$ 80 ; Q _ { 1 } = 10 ; P _ { 2 } = \$ 40 ; Q _ { 2 } = 15\)
• D) \(P _ { 1 } = \$ 55 ; Q _ { 1 } = 22.5 ; P _ { 2 } = \$ 55 ; Q _ { 2 } = 22.5\)

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Definitions:

Expected Return

The weighted average of all possible returns for an investment, with each return being weighted by its probability of occurrence.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Opportunity Sets

The range of possible investment opportunities available to an investor, given their resources and risk tolerance.

Risk-free Rate of Return

The theoretical rate of return of an investment with zero risk, typically represented by government bonds.