Figure 16.4 -Refer to Figure 16.4.Consider the Following Two Pricing Strategies

question 98

Multiple Choice

Figure 16.4

-Refer to Figure 16.4.Consider the following two pricing strategies:
a) a fixed fee and a per-unit price equal to the monopoly price
b) a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.

• A)b; b
• B)a; b
• C)a; neither strategy
• D)b; neither strategy

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Definitions:

Crossover Rate

The point at which two projects have the same net present values and discounted cash flows, used in assessing investment options.

WACC

The Weighted Average Cost of Capital represents a calculation of a company's capital costs, where each capital category is weighted in proportion to its total makeup.

NPV

Net Present Value (NPV) is a financial metric that calculates the present value of all cash flows, both incoming and outgoing, associated with a project or investment.

Cash Flow

The total amount of money being transferred into and out of a business, affecting its liquidity, solvency, and operational capabilities.