The market is a monopoly. A has an overwhelming market share. The demand for A for each year is given by:
Q = 250 - 5P. A has a single plant that it built for $100 million. Each year it has a loan repayment of $6 million to pay off the loan it took out to finance the plant. The plant has some equipment that is worth 10 million if the plant is closed and sold off. Each year A enters into a bulk contracts for which they pay 2 million upfront for all the electricity and water. Their marginal cost is 2 per unit.
Before the beginning and in the middle of each production year, what parts of the firm's fixed costs are sunk? What is a graph of the marginal cost curve? How to derive the marginal revenue function for A? How to derive the optimal price and quantity for A?