Scenario: Tobac Co

question 13

Multiple Choice

Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $) . Also, you should draw in the marginal revenue curve.

-Refer to the scenario above.If the quantity sold is 50 million packs,then the firm's total revenue is ________ and the total cost is ________.

• A) $400 million; $200 million
• B) $300 million; $150 million
• C) $250 million; $100 million
• D) $200 million; $50 million

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Definitions:

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