Gibson Modems has excess production capacity and is considering the possibility of making and selling paging equipment. The following estimates are based on a production and sales volume of 1,200 pagers:
Unit-level manufacturing costs are expected to be $22. Sales commissions will be established at $1.2 per unit. The current facility-level costs, including depreciation on manufacturing equipment ($62,000), rent on the manufacturing facility ($52,000), depreciation on the administrative equipment ($12,600), and other fixed administrative expenses ($72,950), will not be affected by the production of the pagers. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (pagers) on the basis of the number of units of product made (i. e., 5,200 modems and 1,200 pagers).
Required:
a. Determine the per-unit cost of making and selling 1,200 pagers. (Do not round intermediate calculations. Round your answer to 3 decimal places.)
b. Assuming the pagers could be sold at a price of $36 each, should Gibson make the pagers?

Consider the local telephone company, a natural monopoly. the following graph shows the monthly demand curve for phone services and the company’s marginal revenue (mr), marginal cost (mc), and average total cost (atc) curves. 0 2 4 6 8 10 12 14 16 18 20 100 90 80 70 60 50 40 30 20 10 0 price (dollars per subscription) quantity (thousands of subscriptions) d mr mc atc 8, 60 suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. complete the first row of the following table. pricing mechanism short run long-run decision quantity price profit (subscriptions) (dollars per subscription) profit maximization marginal-cost pricing average-cost pricing suppose that the government forces the monopolist to set the price equal to marginal cost. complete the second row of the previous table. suppose that the government forces the monopolist to set the price equal to average total cost. complete the third row of the previous table. under average-cost pricing, the government will raise the price of output whenever a firm’s costs increase, and lower the price whenever a firm’s costs decrease. over time, under the average-cost pricing policy, what will the local telephone company most likely do

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