Table 14-6 A Monopolist Faces the Following Demand Curve

question 20

Multiple Choice

Table 14-6
A monopolist faces the following demand curve:

-Refer to Table 14-6.Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced.What is the total profit if she operates at her profit-maximizing price?

• A) $1
• B) $7
• C) $9
• D) $11

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Definitions:

Plantwide Factory Overhead Allocation

Plantwide factory overhead allocation involves spreading all of the indirect costs of operating a manufacturing plant across all products based on a single cost driver.

Plantwide Factory Overhead Rate

This rate calculates the total factory overhead for a plant as a single rate, which is then applied to allocate overhead costs to different products.

Allocation-Base Usage

The process of distributing costs based on predetermined criteria or bases, such as labor hours or machine hours.

Activity Rates

The estimated activity cost divided by estimated activity-base usage.