The graph above shows the cost and demand curves for a dry-cleaner that has a mo

ID: 1159886 • Letter: T

Question

The graph above shows the cost and demand curves for a dry-cleaner that has a monopoly in a small town.

A) Based on the previous chapter, what is

1. The profit maximizing output for the firm?

2. The price charged for dry-cleaning?

3. What will the total profit earned by the firm be?

B) If the town council decides to regulate the dry-cleaner using cost-plus regulation,

1. what will output be for the firm?

2. What price will the firm charge?

3. Will the firm be earning a profit or a loss?

Price and cost (dollars per article of clothing) 10- MC ATC MR 0 10 20 30 4050 0 Quantity (articles of clothing per day)

Ans

A 20 where Mc=MR

B 6 defined by same above condition

C =(price - ATC) 20=(6-3)20=60

1 less than 3

2 Greater than 6

3 profit because p>ATC

Please like answer. Note answers to part 1 and part 2 of B question can't be accurate figure because amount of markup is not given in question

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