If a nondiscriminating monopolist is operating at an output level where price equals average total cost, we can conclude that
A)economic profit is $0
B)the firm is not maximizing profit
C)the firm should go out of business in the long run
D)the firm is not earning its normal profit
E)the firm should shut down in the short run

Question

Quizplus · Accepted Answer

At the output level where price equals average total cost, the firm is earning normal profit. This means that economic profit is zero. Therefore, choice A is the correct answer. B, C, D, and E are incorrect because they imply that the firm is not doing well, which is not necessarily the case. The firm could be earning normal profit and operating efficiently.

If a Nondiscriminating Monopolist Is Operating at an Output Level