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Prime Cost = Raw Materials + Direct Labor. The prime cost of a single bed frame is ($6,500 + $750) / 10, or $72.50. In order to generate a profit, the company must sell each frame for more than $72.50.
To solve this problem we need to follow these steps: 1  Calculate equilibrium price and quantity without the subsidy. 2  Calculate equilibrium price and quantity with the subsidy. 3  Figure out the base and height of the resulting triangle that represents deadweight loss.