The Reason That the Local Telephone Company Is Able to Engage

question 62

Multiple Choice

The reason that the local telephone company is able to engage in price discrimination between business and residential customers in providing local phone service is that

• A) it is the only provider of local (landline) telephone service.
• B) it must be extremely difficult, if not impossible, for one consumer to resell phone service to another.
• C) business and residential customers differ in their willingness to pay for phone service.
• D) All of the above are correct.

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Definitions:

Markup

The amount added to the cost of goods to cover overhead and profit when determining the selling price.

Sunk Cost

A sunk cost refers to money that has already been spent and cannot be recovered, often considered when making financial decisions about future investments.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.

Condensed Income Statement

A simplified version of an income statement that presents only the essential details, summarizing revenue, expenses, and net income.