The List Price of a New Van Was $30,000 at a Local

question 119

Multiple Choice

The list price of a new van was $30,000 at a local car dealership. However, a customer convinced the dealer to sell the van for $25,000 (the van had cost the dealer $20,000 one year earlier) . The van would cost the dealer $24,000 today. Inflation is 5% per year. The amount of profit that would be recognized by the dealer as a result of the sale using the nominal dollar approach is:

• A) $10,000
• B) $2,500
• C) $5,000
• D) $6,000

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Definitions:

Monopoly

A market structure in which a single seller dominates the market for a particular good or service, without any close substitutes.

Monopolistic Industry

An industry dominated by a single firm that has control over pricing and the market, facing little to no competition.

Blocked Entry

A condition in a market where barriers prevent new firms from entering, often leading to reduced competition and allowing existing firms to maintain higher prices and profits.

Price Elastic

Refers to the responsiveness of the quantity demanded or supplied of a good to a change in its price.