The Price Elasticity of Demand for Melocotones Is Constant and Equal

question 16

Multiple Choice

The price elasticity of demand for melocotones is constant and equal to -2.The melocotone market is controlled by two Cournot duopolists who have different cost functions.One of the duopolists has a constant marginal cost of $675 per ton and produces 50% of the total number of melocotones sold.The equilibrium price of a ton of melocotones must be

• A)$1,800.
• B)$450.
• C)$900.
• D)$675.
• E)$1,350.

---

Definitions:

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, based on a planned amount of cost and activity.

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are considered a variable cost.

Mixing Department

A section within a manufacturing facility where materials are combined to produce a product, often part of the production line.

Weighted-Average Method

A method in cost accounting used to average costs and quantities over a specific period, often applied in inventory valuation and costing of goods sold.