Suppose that the government decides to regulate this natural monopolist by requiring the firm to charge a price of P2. Which is
1 answer:
If the government takes this approach, consumer surplus would increase.
A monopoly is when there is only one firm operating in an industry. A natural monopoly occurs when there is a high start-up cost associated with opening a business or a firm enjoys economies of scale.
Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good. As the price of a good declines, consumer surplus increases. P2 is lower than P1, this means that if price is regulated to P2, consumer surplus would increase.
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Answer:
The right solution is "$78.55".
Explanation:
The given values are:
Material cost,
= $5 per pound
Average freight costs,
= $0.25 per pound
Downtime average,
= 0.40 hours per unit
According to the question,
The direct material cost per unit will be:
=
=
=
= ($)
The direct labor will be:
=
=
= ($)
Manufacturing overhead will be:
=
=
= ($)
hence,
The standard cost per unit will be:
=
=
= ($)