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Draw a correctly labeled graph

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Kohelis Mining is a monopoly and is currently operating at al loss.

(A) draw a correctly labeled graph and show each of the following.

(i) The profit maximizing quantity, labeled Qm

(ii) The profit maximizing price labeled Pm

(iii) the average total cost curve labeled atc

(iv) the allocatively efficient quantity labeled Qa

(B) Suppose the government grants Kohelis Mining a lump sum subisdy such that the firm earns zero economic profit.

(i) WIll the profit maximizing quantity increase, decrease, or remain the same

(C) Suppose instead the governmentprovides Koheilis Mining a per-unit subsidy such that the firm earns zero economic profit.

(i) Will the profit maximizing quantity increase, decrease, or remain the same?

(ii) Will the price paid by costumers increase, decrease, or reamin the same?

(D) In this market will the lump sum or the per unit subsidy to an increase in the total consumer surplus or is the change indeterminate?

Reference no: EM132511790

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