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    profit and optimal price

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    The Appalachian Coal Company sells coal to electric utilities in the southeast. Unfortunately, Appalachian's coal has high particulate content and therefore the company is adversely affected by state and local regulations governing smoke and dust emissions at its customers' electricity-generating plants. Appalachian's total cost and marginal cost functions are:

    TC = $250,000 + $5Q + $0.0002Qsquare

    MC = Delta TC/Delta Q = $5 + $0.0004Q

    where Q is tons of coal produced per month and TC includes a normal rate of return on investments.

    (A) Calculate Appalachian's profit at the profit-maximizing activity level if prices in the industry are stable at $25 per ton and therefore P = MR = $25.

    (B) Calculate Appalachian's optimal price, output, and profit levels if a new state regulation results in a $300,000 fixed cost increase that cannot be passed onto customers.

    © BrainMass Inc. brainmass.com October 9, 2019, 10:54 pm ad1c9bdddf
    https://brainmass.com/economics/regulated-industries/profit-optimal-price-236708

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    The Appalachian Coal Company sells coal to electric utilities in the southeast. Unfortunately, Appalachian's coal has high particulate content and therefore the company is adversely affected by state and local regulations governing smoke and dust emissions at its customers' electricity-generating plants. Appalachian's total cost and marginal cost functions ...

    Solution Summary

    The expert calculates the Appalachian's optimal price, output, and profit levels in this case.

    $2.19