Scenario: Tobac Co

question 254

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.The firm's maximum profit is ________.

• A) $200 million
• B) $175 million
• C) $150 million
• D) $125 million

---

Definitions:

Machine Lubricant

Substances used to reduce friction and wear between moving parts in machinery, thereby extending their life and improving efficiency.

Marketing Behavior

The actions and strategies implemented by companies to study consumer needs and develop products, pricing, promotions, and distribution methods to satisfy those needs.

Customer Relationship Management

A strategic approach that businesses use to manage and analyze interactions with past, current, and future customers to improve relationships and drive sales growth.

Organization's Goals

The set objectives that a company or institution aims to achieve to fulfill its mission and drive long-term success.