Answer to Question #181262 in Economics for irma cora

Question

Suppose government has to pay P100M a year for a nuclear power plant for 20 years with an annual operating cost per year of P50M and sales of P100M. Plant life is 20 years. Should it operate the plant?

Answer 1

$$20\times100=2000$$

$$2000-20\times50=1000$$

$$\frac {1000}{20}=50$$

Since the profit from the annual activity is higher than the profitability level, no intervention is required.