Posted by **Eric** on Monday, April 28, 2008 at 11:21pm.

Imagine that the efficient provision of telephone calls in a medium-sized city involves an initial investment of $100 million financed by borrowing at 6 percent and variable cost of 5 cents a phone call. The phone company's annual fixed cost would be $6.0 million (6.00 percent of $100).

A) Use this info about costs to plot marginal cost and average total cost.

B) Assume that regulators set price at 5 cents, the level of marginal cost. What is the firm's profit position if 60 million calls a year are demanded at that price?

C) Is setting price equal to marginal cost a viable option in this case? Why or why not?

## Answer This Question

## Related Questions

- math - 43. A phone company charges 10 cents per minute for the first 3 minutes ...
- Algebra - ABC phone company charges $18 per month plus 7 cents per minute of ...
- math - The telephone bill consists of a fixed monthly rent and a variable part ...
- math - 23. There are two telephone companies provide home phone service in New ...
- math - 23. There are two telephone companies provide home phone service in New ...
- Math/3rd grade - When Joe calls Hank on the phone the call usually last 4 ...
- Math - The phone company charges a flat rate of $2.50 plus and additional $0.50 ...
- Math - Your phone company charges $0.05 per minute for long distance phone calls...
- Pre Algebra - A phone company charges $27.95 monthly fee and .12/min. for local ...
- Math/Solve - ABC phone company charges $17 per month plus $0.03 per minute of ...

More Related Questions