The Public Service Company of the Southwest is regulated by an elected state utility commission. The firm has total assets of $500,000. The demand function for its services has been estimated as P=$250-$015Q the firm faces the following total cost function: TC=$25,000+$10Q

The Public Service Company of the Southwest is regulated by an elected state utility commission. The firm has total assets of $500,000. The demand function for its services has been estimated as P=$250-$015Q the firm faces the following total cost function: TC=$25,000+$10Q

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 8E

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Question

The Public Service Company of the Southwest is regulated by an elected state utility commission. The firm has total assets of $500,000. The demand function for its services has been estimated as

P=$250-$015Q

the firm faces the following total cost function:

TC=$25,000+$10Q

In an unregulated environment, the firm would charge and produce units?

The total profit at this price-output level is $ , which means the firm earns a percent rate of return on its asset base.

The firm has proposed charging a price of $100 for each unit of output. If this price is charged, the total profit will be$ , which means the firm earns a percent rate of return on its asset base.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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