-On 1 January 20X0, Billy Ltd Acquired 100% of the c

question 6

Multiple Choice

$\begin{array} { l c c c } & \begin{array} { c } \text { Piano Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Billy Ltd } \\\text { \$ millions }\end{array} & \begin{array} { c } \text { Man Ltd } \\\text { \$ millions }\end{array} \\\text { Retained profits } & 2300 & 800 & 500 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X0 Total } & \mathbf { 5 0 0 0 } & \mathbf { 1 } 200 & \mathbf { 8 0 0 } \\\text { Retained profits } & 4300 & 1200 & 600 \\\text { Paid-up capital } & 2700 & 400 & 300 \\\text { 1 Jan 20X2 Total } & 7 \mathbf { 0 0 0 } & \mathbf { 1 6 0 0 } & \mathbf { 9 0 0 }\end{array}$
-On 1 January 20X0, Billy Ltd acquired 100% of the issued capital of Man Ltd by paying $1 000 million cash.On 1 January 20X2, Piano Ltd acquired 100% of the issued capital of Billy Ltd by paying $1 600 million cash.At these two dates, the fair value of equity of the companies is shown in the above table.
How much goodwill was acquired by each company if the partial method is applied?

• A)
• \(\begin{array}{llcc}
• \text { Piano Ltd \$ millions } & 0 \\
• \text { Billy Ltd \$ millions } &200\\
• \end{array}\)
• B)
• \(\begin{array}{llcc}
• \text { Piano Ltd \$ millions } & 400 \\
• \text { Billy Ltd \$ millions } &200\\
• \end{array}\)
• C)
• \(\begin{array}{l}
• \text { Piano Ltd } \$ \text { millions } \quad 200\\
• \text { Billy Ltd \$ millions } \quad 400
• \end{array}\)
• D)
• \(\begin{array}{llcc}
• \text { Piano Ltd \$ millions } & 0 \\
• \text { Billy Ltd \$ millions } &100\\
• \end{array}\)

Identify the characteristics and outcomes of the long-run equilibrium in monopolistic competition, such as breaking even and operating below peak efficiency.

Recognize the impact of entry and exit of firms in monopolistic competition on profits and market dynamics.

Analyze the role of product differentiation in monopolistic competition, including the basis for differentiation and its impact on consumer choice.

Understand the concept of elasticity of demand for monopolistically competitive firms and its implications.

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