help Questionof 080 points thus entry by new fims is prohibi

help Question&(of 0.80 points thus entry by new fims is prohibited.A on the price that n response, she has proposed legisletion that would award esch existing m 20 percent of a contract for 650 units at pessed, by how much should you expect your profits to change? Instruction: Iif you expect profits to fal, enter a negative number

Solution

Until the time the government passes the legislation, all firms compete with each other eading to a price war and thereby, end up charging a price equal to the marginal cost. That is, P = MC.

Under this situation, no firm gains profit (just like perfect competition).

Thus, Profit earned = $0.

After the passing of the legislation,

Q = 20% of 650 = 0.20 x 650 = 130

And, P = $50

Thus, Total Revenue (TR) = 130 x 50 = $6500

Total Cost (TC) = Q x MC = 150 x 40 = $6000

Profit = TR - TC = 6500 - 6000 = $500

Thus, there is change in profit for $500.