The Following Question Are Based on the Following Diagram of a Monopolist

question 22

Multiple Choice

The following question are based on the following diagram of a monopolist:

-If the monopolist is currently producing 0A and wants to maximize profits,it should

• A) do nothing because it is maximizing profits.
• B) decrease output to zero.
• C) raise output to 0B.
• D) raise output to 0C.
• E) raise output above 0C.

---

Definitions:

Margin Of Safety

The excess of budgeted or actual dollar sales over the break-even dollar sales.

Margin Of Safety Percentage

A financial ratio that measures the difference between actual or projected sales and the break-even point, expressed as a percentage of sales.

Contribution Margin

The amount remaining from sales revenue after variable production costs are deducted, contributing to covering fixed costs and generating profit.

High-Low Method

A technique used in accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.