If the Marginal Cost of Making a Photocopy Is 2

question 88

Multiple Choice

If the marginal cost of making a photocopy is 2 cents and the elasticity of demand is 3, the profit-maximizing price is

• A)5 cents.
• B)4 cents.
• C)3.33 cents.
• D)3 cents.
• E)6 cents.

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Definitions:

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Replacement Chain

A decision analysis tool used to choose between mutually exclusive projects with differing durations by comparing the equivalent annual annuity.

Equivalent Annual Annuity

A financial calculus method for comparing the annualized cash flows of projects with different lifespans.

Initial Outlays

The initial investments or costs incurred when starting a project, business, or investment.