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