Refer to Scenario 10.8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

A) She will lose money and will go out of business.
B) She will break even.
C) She will make a profit.
D) none of the above

When the regulatory agency sets the price where average revenue equals average cost, it means that price = AC = Q + (10,000/Q). Solving for Q, we get Q = 100. This means that Adriana will produce 100 green calculators.

At this output level, her average cost will be AC = Q + (10,000/Q) = 100 + (10,000/100) = $200 per calculator.

Also, her price will be P = AR = 30 - (Q/2) = 30 - (100/2) = $20 per calculator.

Therefore, her total revenue will be TR = P x Q = $2,000.

Her total cost will be TC = AC x Q = $20,000.

Her profit will be TR - TC = -$18,000. This means that she will break even and not make any profit.