Use the Following to Answer Question(s): Chip Production

question 138

Multiple Choice

Use the following to answer question(s) : Chip Production
Assume that Sandy Chip Products, Inc., is the world's only producer of a special kind of computer chip.Its patents assure that it will continue to be the only producer for at least the next decade.Chip production requires clean water.The firm gets its water from a river, which is being polluted by paper mills located upstream.Sandy Chip therefore has to process the water before using it.A recently enacted pollution-control program, whereby the paper mills will be fined for polluting the river, will result in less pollution and thus lower Sandy Chip's costs.Sandy Chip expects its marginal and average cost to fall by $20 per chip.
-(Exhibit: Chip Production) Before the imposition of the pollution fines on the paper mills, the chip firm probably:

• A) had negative economic profits.
• B) had zero economic profits.
• C) had positive economic profits.
• D) was unable to estimate its own profits.

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