Marin County Enterprises has a monopoly on the production of lunar-powered homes and has the normal U-shaped average cost curve. At its present profit-maximizing output and price, it is able to earn a positive economic profit. Graphically show the effects in the product market (output, price, profit, and so on) of each of the following changes:
a. Lunar-powered homes become a nationwide fad.
b. The cost of labor (a variable factor of production) rises.
c. The rent for the firm’s office space (a fixed factor of production) rises.
If the Federal Alternative Power Commission can regulate the prices of lunar-powered homes and the promotion of efficiency is the commission’s goal, what price should it set? What will happen to the output and profit of Marin County Enterprises as a result?

  • CreatedNovember 14, 2014
  • Files Included
Post your question