Suppose That in Horsehead, Massachusetts, the Cost of Operating a Lobster

question 25

Multiple Choice

Suppose that in Horsehead, Massachusetts, the cost of operating a lobster boat is $6,000 per month.Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is $1,000(18x - x²) .If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then the number of boats who enter will be X₁.If the number of boats that operate in the bay is regulated to maximize total profits, the number of boats in the bay will be X₂.

• A)X₁ = 6 and X₂ = 4.
• B)X₁ = 12 and X₂ = 12.
• C)X₁ = 12 and X₂ = 6.
• D)X₁ = 16 and X₂ = 10.
• E)None of the above.

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Definitions:

Contribution Format

A statement or report format, primarily used in managerial accounting, that separates fixed and variable costs to evaluate the performance of a profit center.

Variable Expenses

Costs that change in proportion to the level of activity or production volume.

Break-Even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in a net income of zero.

Retail Division

A segment of a company that directly sells products to consumers, typically involving activities and costs related to retail operations.