How big would the firms profit or loss be

Reference no: EM13214192

Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $30 million per year and a variable cost of $3 per bag no matter how many bags are produced.

a. If this firm kept on increasing its output level, would ATC per bag ever increase? Is this a decreasing-cost industry?

b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? $ per bag At that price, what would be the size of the firm's profit or loss? At that price, the firm's equals $ million. Would the firm want to exit the industry?

c. You find out that if you set the price at $4 per bag, consumers will demand 30 million bags. How big will the firm's profit or loss be at that price? $

d. If consumers instead demanded 40 million bags at a price of $4 per bag, how big would the firm's profit or loss be? At that price, the firm's equals $ million.

e. Suppose that demand is perfectly inelastic at 40 million bags, so that consumers demand 40 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return?

Reference no: EM13214192

Questions Cloud

Explain how much oxygen is in of the compound : Magnesium hydroxide is 54.87% oxygen by mass. How much oxygen is in 114 g of the compound?

Explain cathode ray tube in television accelerate : A free electron initially at rest at the back of Cathode ray tube in your television accelerate through a potential

Show the effects of conscription on aggregate consumption : Suppose that the government chooses conscription. That is, the government forces the representative consumer to supply a units of time to the government as military service C with a lump-sum tax. Use a diagram to show the effects of conscription o..

Compute the first three electron energies for an electron : Consider a lithium nucleus, of charge +3q Calculate the first three electron energies for an electron in Li++ ion

How big would the firms profit or loss be : Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $30 million per year and a variable cost of $3 per bag no matter how many bags are produced.

Describe the large disparity in the numerical results pf : Energy costs vary greatly with energy source: coal @ $25.00/ton, gasoline @ a pump price of $2.00/gal, and electricity @ $0.1000/kWhr. Conventional practice is to put these on a common basis by expressing

How do you determine the level of the barrier : How do you determine the value of the firm and determine the volatility of the describing the change in firm value - How do you determine the level of the barrier?

Explain whether the increase would be more justified : Gina Picaretto is production manager at the Rich Manufacturing Company. Each year her unit buys up to 100,000 machine parts from Bhagat Incorpo- rated. The contract specifies that Rich will pay Bhagat its production costs plus a $5 markup (cost- p..

Find the mean and standard deviation of the payout : The payouts for the Powerball lottery and their corresponding odds and probabilities of occurrence are shown below. The price of a ticket is $1.00. Find the mean and standard deviation of the payout.

User Account

All Pages