The Accompanying Figure Depicts the Downward-Sloping Market Demand (D) Curve

question 18

Multiple Choice

The accompanying figure depicts the downward-sloping market demand (D) curve for a five-day western Caribbean cruise on Carnival Cruise Lines. The price (P) is per person in U.S. dollars, and the quantity (Q) is the number of passenger tickets sold. This figure also shows the company's relevant marginal revenue (MR) curve and marginal cost (MC) curve. Use this figure to answer the questions.
-Calculate the change in total welfare if Carnival Cruise Lines moves from a perfect price discrimination model to a monopolist model that charges a single price.

• A) There would be a gain of $800,000.
• B) There would be a loss of $400,000.
• C) There would be a gain of $400,000.
• D) There would be a loss of $1.2 million.
• E) There would be a gain of $1.2 million.

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Definitions:

Deferred Income Tax Liability

A tax obligation due in the future for income that has been recognized in the financial statements before it is taxable.

Income Tax Expense

The cost to a company for its taxable income, calculated according to the applicable tax laws governing the period.

Accrued Vacation Benefits

The amount of vacation time earned by employees but not yet taken or paid out, often recorded as a liability on the employer's balance sheet.

Adjusting Entry

An accounting entry made in the general ledger to update the book values of assets, liabilities, revenues, and expenses at the end of an accounting period.