A Local Video Store Estimates Their Average Customer's Demand Per

question 119

Multiple Choice

A local video store estimates their average customer's demand per year is Q = 7 - 2P, and knows the marginal cost of each rental is $0.5.How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?

• A)$9.
• B)$10.
• C)$11.
• D)$12.

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Definitions:

Cost Basis

The original value of an asset for tax purposes, usually the purchase cost, adjusted for stock splits, dividends, and return of capital distributions.

Unanimous Consent

An agreement method where all parties involved must agree entirely on a decision or action.

Net Assets

The total assets of a company minus its total liabilities, representing the shareholders' equity or ownership interest.

Equity Investments

Investments in the equity of other companies, representing ownership interests that offer potential dividends and capital gains.