The Average Consumer at a Firm with Market Power Has

question 70

Multiple Choice

The average consumer at a firm with market power has an inverse demand function of P = 10 − Q.The firm's cost function is C = 2Q.If the firm engages in optimal two-part pricing,it will earn profits of:

• A) $2.
• B) $32.
• C) $64.
• D) None of the answers are correct.

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Definitions:

Total Revenue

The total income received by a firm from selling its goods or services, calculated as the price per unit times the number of units sold.

Total Revenue

The total amount of money a company generates from the sale of goods or services before any expenses are subtracted.

Demand Elastic

Refers to how sensitive the quantity demanded of a good is to a change in its price; high elasticity indicates consumers will significantly alter their demand in response to price changes.

Price Effect

The impact on the quantity demanded of a good or service resulting from a change in its price, holding all other factors constant.