The Average Consumer at a Firm with Market Power Has

question 62

Multiple Choice

The average consumer at a firm with market power has an inverse demand function of P = 10 - Q.The firm's cost function is C = 2Q.If the firm engages in optimal two-part pricing, it will earn profits of

• A)$2.
• B)$32.
• C)$64.
• D)none of the statements associated with this question are correct.

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Definitions:

Activity-Based Costing

A costing methodology that assigns manufacturing and non-manufacturing costs to products or services based on the activities needed to produce them.

Machine-Hours

A measure of the amount of time machines are used in the production process, often used as a basis for allocating manufacturing overhead.

Overhead Cost

Expenses related to the ongoing operation of a business that cannot be directly traced to a specific product or service, like rent, utilities, and insurance.

Activity-Based Costing

A method of costing that apportions overhead and indirect expenditures to products and services related to the activities they entail.