The following figure shows the demand curve [ES],the average cost curve [AC],the marginal cost curve [MC],and the marginal revenue curve [MR] for a firm.
Figure 8-1

-Refer to Figure 8-1.If the regulator institutes marginal-cost pricing in the market,then:
A)marginal cost = average cost.
B)average revenue = marginal cost.
C)marginal cost = marginal revenue.
D)price = marginal cost = marginal revenue.
E)price = marginal cost

Question

The following figure shows the demand curve [ES],the average cost curve [AC],the marginal cost curve [MC],and the marginal revenue curve [MR] for a firm.
Figure 8-1
 
-Refer to Figure 8-1.If the regulator institutes marginal-cost pricing in the market,then:
A)marginal cost = average cost. 
B)average revenue = marginal cost. 
C)marginal cost = marginal revenue. 
D)price = marginal cost = marginal revenue. 
E)price = marginal cost < average cost.

Quizplus · Accepted Answer

Under marginal-cost pricing, the price is set equal to the marginal cost. In a natural monopoly, the average cost is typically higher than the marginal cost, so price = marginal cost < average cost.

The Following Figure Shows the Demand Curve [ES],the Average Cost