The Figure Given Below Shows the Demand Curves of Two

question 74

Multiple Choice

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
-Refer to Figure 11.4. What price must be charged from each group to maximize profits?

• A)Both groups must be charged P₁ .
• B)Both groups must be charged P₂ .
• C)Group 1 must be charged P₁ and group 2 must be charged P₂.
• D)Group 1 must be charged P₂ and group 2 must be charged P₁.
• E)Both the groups must be charged a price that is equal to the marginal cost.

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Definitions:

Transfer Price

The cost at which products, services, or intellectual property are exchanged between departments inside the same corporation.

Fixed Costs

Expenses that remain constant regardless of the amount of output or sales, including lease payments, employee wages, and insurance costs.

Average Costs

The total costs divided by the total quantity produced, expressing the cost per unit of goods or services.

Transfer Price

The price at which goods, services, or intellectual property are traded between divisions within the same organization.