Return A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to nomes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P=24-0.0004Qd Price and cost ($ per 1,000-gallon unit) 14 64 MR Quantity (1,000-gallon units per month) Quasi-fixed capital inputs cost per month is $ LAC AQFC LMC

Return A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to nomes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P=24-0.0004Qd Price and cost ($ per 1,000-gallon unit) 14 64 MR Quantity (1,000-gallon units per month) Quasi-fixed capital inputs cost per month is $ LAC AQFC LMC

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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