The graph shows the relevant curves for a natural monopoly. Assume that in regulating this monopoly, policymakers have directed the firm to follow an average cost pricing rule, where there is a regulated fair-return price.What is the firm's profit? If the firm is losing money, express the loss as a negative number. Round to the nearest penny.**Graph Explanation:**- **Axes:** - The vertical axis represents the price in dollars ($). - The horizontal axis represents the quantity.- **Curves:** - **Demand Curve:** The demand curve is downward sloping, indicating the relationship between price and quantity demanded. - **Marginal Revenue Curve:** This curve is also downward sloping and lies below the demand curve. It represents the additional revenue from selling one more unit. - **Average Cost Curve:** An upward-sloping curve showing the average cost per unit at different levels of output. - **Marginal Cost Curve:** This is the curve representing the cost of producing one additional unit.- **Key Points:** - Intersection of Average Cost Curve and Demand Curve determines the price and quantity under average cost pricing rule. - Intersection of Marginal Cost Curve and Demand Curve indicates the socially optimal quantity and price.The task is to calculate the firm's profit or loss using these curves, adhering to the average cost pricing rule.

Average cost pricing is the pricing method where the price of good is equal to the average cost. Profit = TR - TC = PQ - ATC • Q = Q(P-ATC) We have , ATC = Demand at Q = 29.5 At this quantity, ATC is $18.5 So, Price = $18.5 So, Profit = 29.5(18.5 - 18.5) = 0 Hence, Firms Profit = $0

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The graph shows the relevant curves for a natural monopoly. Assume that in regulating this monopoly, policy makers have directed the firm to follow an average cost pricing rule, where there is a regulated fair-return price. What is the firm's profit? If the firm is losing money, express the loss as a negative number. Round to the nearest penny. Price ($) 36.9 31.6 25.9 22.6 18.5 16.7 15.2 11.7 10.3 Marginal revenue 11.1 16.5 29.5 Average cost Marginal cost Demand 37.5 Quantity $

The graph shows the relevant curves for a natural monopoly. Assume that in regulating this monopoly, policy makers have directed the firm to follow an average cost pricing rule, where there is a regulated fair-return price. What is the firm's profit? If the firm is losing money, express the loss as a negative number. Round to the nearest penny. Price ($) 36.9 31.6 25.9 22.6 18.5 16.7 15.2 11.7 10.3 Marginal revenue 11.1 16.5 29.5 Average cost Marginal cost Demand 37.5 Quantity $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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