A Monopoly Has Two Production Plants with Cost Functions C₁

question 85

Multiple Choice

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂².The demand it faces is Q = 500 − 10P.What is the profit-maximizing price?

• A) $12.5 per unit
• B) $6.25 per unit
• C) $31.25 per unit
• D) $18.75 per unit

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Definitions:

Paid-in Capital

The amount of money shareholders have invested in a company in exchange for equity, excluding any earnings retained by the company.

Market Value

The ongoing rate at which a commodity or service is offered for buying or selling in the market.

Dividend Yield

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Cash Dividends

Payments made by a corporation to its shareholders in the form of cash out of its earnings.