Can you solve problem 3 only? thank you Problem 2Elixir Springs is a natural monopoly that bottles Elixir, a unique health product with no substitutes.The total fixed cost incurred by Elixir Springs is $150,000, and its marginal cost is 10 cents abottle. The figure illustrates the demand for Elixir.a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell?b) Does Elixir Springs maximize total surplus or producer surplus?Figure 1 Elixir Springs50403020ATC10MCMRD0.51.01.52.02.5Quantity (millions of bottles/year)Problem 3The ACCC regulates Elixir Springs in problem 2 by imposing an average cost pricing rule.a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell?b) What is consumer surplus?c) Is the regulation in the social interest? Explain.Price (cents per bottle)

In the problem discussed above, there is a restriction that is being imposed on monopoly, which is,…

Problem 3 The ACCC regulates Elixir Springs in problem 2 by imposing an average cost pricing rule. a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell? b) What is consumer surplus? c) Is the regulation in the social interest? Explain.

Problem 3 The ACCC regulates Elixir Springs in problem 2 by imposing an average cost pricing rule. a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell? b) What is consumer surplus? c) Is the regulation in the social interest? Explain.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Can you solve problem 3 only? thank you

Problem 2
Elixir Springs is a natural monopoly that bottles Elixir, a unique health product with no substitutes.
The total fixed cost incurred by Elixir Springs is $150,000, and its marginal cost is 10 cents a
bottle. The figure illustrates the demand for Elixir.
a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell?
b) Does Elixir Springs maximize total surplus or producer surplus?
Figure 1 Elixir Springs
50
40
30
20
ATC
10
MC
MR
D
0.5
1.0
1.5
2.0
2.5
Quantity (millions of bottles/year)
Problem 3
The ACCC regulates Elixir Springs in problem 2 by imposing an average cost pricing rule.
a) What is the price of a bottle of Elixir and how many bottles does Elixir Springs sell?
b) What is consumer surplus?
c) Is the regulation in the social interest? Explain.
Price (cents per bottle)

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