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    Costs of Regulation and Profit Maximizing Price

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    Market demand and cost revenue relations:
    P=$5000 -$0.25Q
    MR=$5000 - $0.5Q^2(squared)
    TC=$6,000,000 + $500Q +$0.5Q^2(squared)
    MC+$500+$1Q
    Marginal cost: $150 per unit, OSHA mandated safety feature
    A. Calculate profit-maximizing price/output combination and economic profit level before installation of the OSHA mandated shielding equipment
    B Calculate same after the OSHA guidelines have been met. Who pays the economic burden of meeting OSHA guidelines?

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    https://brainmass.com/economics/elasticity/costs-regulation-profit-maximizing-price-19565

    Solution Preview

    A. Calculate profit-maximizing price/output combination and economic profit level before installation of the OSHA mandated shielding equipment

    To max profit, the first order condition of the firm is:
    MR=MC, or
    5000 - 0.5Q=500+Q, or
    1.5 Q = 4500
    solve for Q= 3000
    then from the demand curve, P=5000 -0.25Q =5000 -0.25*3000 = $4250
    TC= 6,000,000 + ...

    Solution Summary

    The expert examines the costs of regulations and profit maximizing prices.

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