Suppose P = 20 − 2Q Is the Market Demand

question 69

Multiple Choice

Suppose P = 20 − 2Q is the market demand function for a local monopoly.The marginal cost is 2Q.The local monopoly tries to maximize its profits by equating MC = MR and charging a uniform price.What will be the equilibrium price and output?

• A) $6.33, 3.33 units
• B) $6.33, 5 units
• C) $13.33, 3.33 units
• D) $10, 5 units

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Definitions:

Equivalent Unit

A measure used in process costing that converts the work done on partial units into a number of fully completed units.

Process Costing

A costing method used in manufacturing where costs are assigned to products based on the average cost of production steps or processes.

Conversion Costs

The aggregate cost of direct labor and the overheads in manufacturing necessary for turning raw materials into final goods.

Cutting Department

A section within a manufacturing facility where materials are cut to size or shape before proceeding to further stages of production.