Question

Page 11 > of 12 36. When firms get together and agree on prices and output, it is called a. Price leadership b. The rule of reason c. Monopolistic competition d. Collusion e Intermediation The question below is based on the following cost and revenue schedule for the Presto Piano Company Output Total Revenue (5) Total Cost (5) 1 2 3 4 S 6 1,000 2,000 3,000 4,000 5,000 6,000 1,000 1.600 2.500 3,300 4,300 7,000 37. To maximize profits, the firm should produce between: a. 1 and 2 units per period, b. 2 and 3 units per period. c. 3 and 4 units per period. d. 4 and 5 units per period. e. 5 and 6 units per period. 38. If the permanent annual rate of return on an asset that costs $20,000 is 7 percent, then cach year the owner of the asset will eam: 7 a $1,400 b. $14,000 c. $4.000 d. $1,800 e. $1,600 MacBook Pro Q & 4 7

Answer 1

36. Ans - d) collusion

Explanation;

When firm come together and agree on price and output it is called collusion by definition. This is common practice in oligopoly market.

37. Ans - d) 4 and 5 per unit

Explanation:

As MR = 1000 ( at all level of output, according to the table) and to maximize profit firm must produce where MR = MC

And MC = 1000 when firm increas output from 4 to 5. So ans is D)

38. Ans - a) $1400

Explanation:

Owner of asset earn = 20,000*7% = 1400