A Monopoly Has Two Production Plants with Cost Functions C₁

question 20

Multiple Choice

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂².The demand it faces is Q = 500 − 10P.What is the condition for profit maximization?

• A) MC₁(Q₁) = MC₂(Q₂) = P(Q₁ + Q₂).
• B) MC₁(Q₁) = MC₂(Q₂) = MR(Q₁ + Q₂).
• C) MC₁(Q₁ + Q₂) = MC₂(Q₁ + Q₂) = P (Q₁ + Q₂).
• D) MC₁(Q₁ + Q₂) = MC₂(Q₁ + Q₂) = MR (Q₁ + Q₂).

Apply the concept of investment turnover and its impact on return on investment.

Distinguish between investment centers, profit centers, and cost centers.

Calculate and interpret residual income.

Understand the concept of transfer pricing and its approaches.

---

Definitions:

Debt Restrictions

Clauses or covenants in a loan agreement that limit or restrict the borrower's actions to protect the lender’s interests.

Restructuring Debt

The process of renegotiating the terms of existing loans to improve financial stability.

Composition

The makeup or structure of something, in finance it might refer to the mix of assets in a portfolio or ingredients of a financial product.

Creditors

Entities or individuals to whom money is owed by a person or company.