FIGURE 12- 1 Consider Three Firms,A,B and C,all Producing Kilos

FIGURE 12- 1 Consider three firms,A,B and C,all producing kilos of potatoes (per year) in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms.

-Consider a public utility that is a natural monopoly with falling long- run average costs.If a regulatory agency ordered this firm to price all of its output at marginal cost,then the firm

A) would earn profits since the demand curve is perfectly inelastic.
B) could incur profits or losses depending on the position of the demand curve and the LRAC curve.
C) would lose money unless it is subsidized.
D) would have to shut down.
E) would incur losses since the demand curve is perfectly elastic.