The market demand for recorder is given by:

P = 260 - 5Q; where P = price per recorder and Q is the number of recorders.

Currently, Firm A is the single seller in the market, and its total cost is:

TC = 1125 + 10Q

Note: Be sure to show your work and do not round up your answers.

a)

What is Firm A's level of output, price, and profit? What is the efficiency loss in the market for recorder?

b)

In attempt to increase output, the government decides to regulate the industry through an average-cost pricing.

What are the price charged and the quantity sold after the regulation?

c)

What is the efficiency loss after the regulation? What is the change in total surplus?

d)

Now, suppose it costs the government $1450 to administer and enforce the new regulation. Does it pay to regulate the industry? Yes/No, explain.