Suppose a Monopoly Firm Has an Annual Demand Function of Q^d

question 1

Multiple Choice

Suppose a monopoly firm has an annual demand function of Q^d = 20,000 - 250P,annual variable costs of VC = 16Q + 0.002Q² and marginal cost of MC = 16 + 0.004Q,where Q is the annual quantity of output.In addition,the firm has an avoidable fixed cost of $25,000 per year.If this firm maximizes its profit,what is the value of the consumer surplus in the market?

• A) $121,000
• B) $60,500
• C) $136,125
• D) $0

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Definitions:

Gain or Loss

Financial terms indicating the positive or negative financial result of transactions or events affecting the company's assets, liabilities, or equity.

Asset Sale

The sale of a company's assets, as opposed to the company itself or its shares, typically to raise cash or dispose of unwanted resources.

AASB 116

Australian Accounting Standards Board 116 pertains to Property, Plant, and Equipment, outlining the accounting treatment for most types of property, plant, and equipment.

Depreciation Methods

These are systematic ways of allocating the cost of a tangible asset over its useful life. Examples include straight-line and declining balance methods.