The Miller- Lyons Electric Company is engaged in a rate case with the local regulatory commission. The

Question:

The Miller- Lyons Electric Company is engaged in a rate case with the local regulatory commission. The demand curve for the firm's product is
P = 1,000 − 2Q
where P is price per unit of output (in dollars) and Q is the output (in thousands of units per year). The total cost (excluding the of the capital invested in the firm by its owners) is
TC = 50 + 0.25Q
where TC is expressed in millions of dollars and Q is the output (in units per year).
a. The Miller- Lyons Electric Company has requested an annual rate (that is, price) of $480. If the firm has assets of $100 million, what would be its rate of return on its assets if this request is granted?
b. How much greater would the firm's accounting profit be if it were deregulated?
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...