The manufacture of herbal health tonic is a competitive industry. The manufacturing facilities have an...
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The manufacture of herbal health tonic is a competitive industry. The manufacturing facilities have an annual output of 100,000 gallons. Operating costs are $2 per gallon. A 100,000-gallon capacity plant costs $500,000 to build and has an indefinite life, with no salvage value. The cost of capital is 20% (assume no taxes). What is the equilibrium price of tonic per gallon?
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