The Figure Below Shows the Result of a Price Fixing

question 43

Multiple Choice

The figure below shows the result of a price fixing scheme that raised price above competitive levels at point C to a price of $15 at point M. The formation of this cartel caused a deadweight loss to society of $____________ of social surplus.

• A)$5,000
• B)$15,000
• C)$20,000
• D)$31,250

Comprehend the role of critical thinking in ethical reasoning and decision-making.

Understand the regulatory environment encouraging ethical behavior, such as the Sarbanes-Oxley Act.

Evaluate the ethical considerations in respecting human rights within diverse societal contexts.

Apply ethical theories to conceptual and practical dilemmas in business ethics.

---

Definitions:

Net Present Value (NPV)

Net Present Value is a method used in capital budgeting to evaluate the profitability of an investment or project, calculating the present value of all cash inflows and outflows using a specified discount rate.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used in capital budgeting to estimate the profitability of potential investments.

Payback Method

An investment appraisal technique that calculates the time needed for an investment to generate cash flows sufficient to recover the initial cost.

Weighted Average Cost of Capital (WACC)

A calculation of a company's cost of capital in which each category of capital (debt, equity) is proportionally weighted.