Question
In: Economics
If a regulatory commission wants to ensure that a monopolist produces the largest quantity of output...
If a regulatory commission wants to ensure that a monopolist produces the largest quantity of output that is consistent with earning a normal profit, it will require the monopolist to charge a price equal to its
A. marginal cost.
B. average fixed cost.
C. average variable cost.
D. average total cost.
E. total cost.
Solutions
Expert Solution
Option D
D. average total cost.
An economic profit is zero then the firm is earning a normal profit
Economic profit =(P-ATC)*Q
this is zero when P=ATC
The government will charge a price equal to the ATC.
Rahul Sunny answered 2 years agoRelated Solutions
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