Table 16-3 The Information in the Table Below Shows the Total Demand

question 143

Multiple Choice

Table 16-3
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $100,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

-Refer to Table 16-3.Assume that there are two profit-maximizing digital cable TV companies operating in this market.Further assume that they are able to collude on the price and quantity of premium digital channel subscriptions to sell.As part of their collusive agreement they decide to take an equal share of the market.How much profit will each company make?

• A)$40,000
• B)$170,000
• C)$480,000
• D)$540,000

Appreciate the significance of budgeted vs. actual performance analysis in managerial accounting.

Calculate sales price and volume variances to assess performance in non-manufacturing contexts.

Recognize the impact of volume changes on unit fixed and variable costs.

Understand the accounting treatment for insignificant cost variances.

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Definitions:

Barriers to Entry

Factors that make it difficult for new firms to enter a market, such as high start-up costs, stringent regulations, or strong incumbent firms.

Monopolist

A market participant that has exclusive control over the supply of a particular good or service, potentially allowing them to manipulate the market.

Increase Their Profits

A strategy or action that leads to a higher amount of net earnings by a business or individual.

Incentive Structure

The system of rewards and penalties that motivates individuals or groups to behave in specific ways beneficial to achieving desired outcomes.