I can’t answer questions “B, D, and E” Edit View Buddies Window Help 66% C) Wed

Question

I can’t answer questions “B, D, and E” Edit View Buddies Window Help 66% C) Wed 7:31 PM ck my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion Return to question 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 mition per year and a variable cost of $1 per bag no matter how many bags are produced Instructions: Enter your answers as whole numbers. In part e, round your answer to 2 decimal places a. If this firm kept on increasing its output level, would ATC per bag ever increase? No Is this a decreasing-cost industry Yes b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? Answer is complete and correct 1per bag At that price, what would be the size of the firm's profit or loss? 0 Answer is complete but not entirely correct. K Prev 17 of 17 Next Next 20 PH 3 0

Explanation / Answer

B) Socially optimal price: P = MC = VC

In this case, VC = 1

So, socially optimal price = $1

D) Profit = (P-VC)Q - FC = (2-1)40 - 30 = $10 million (profit)

E) In order to earn fair return,

(P-VC)Q - FC = 0

(P-1)40 - 30 = 0

40P = 70

P* = $1.75

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