A Monopolist Earns $50 Million Annually and Will Maintain That

question 16

Multiple Choice

A monopolist earns $50 million annually and will maintain that level of profit indefinitely,provided no other firm enters the market.If another firm successfully enters the market,the incumbent's profits remain at $50 million the first period,but fall to $25 million annually thereafter.The opportunity cost of funds is 10 percent,and profits in each period are realized at the beginning of each period.If the monopolist can earn $27 million indefinitely by limit pricing,should it do so?

• A) Yes, it will earn $297 million in present value if it does this.
• B) Yes, it will earn $270 million in present value if it does this.
• C) No, it will earn $297 million in present value if it does this.
• D) No, it will earn $270 million in present value if it does this.

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Definitions:

Avoidance Goals

Goals framed in terms of avoiding unpleasant experiences, such as trying not to look foolish in public.

Approach Goals

Goals that focus on achieving a positive outcome or moving towards a desirable object, event, or outcome.

Mastery Goals

Objectives focused on developing competence and mastering a task rather than comparing oneself to others.

Sexual Script

Socially learned behaviors and expectations about how sexual experiences and relationships should unfold.