The diagram below shows the market demand curve and the cost curves for a single firm. FIGURE 12- 6
-Refer to Figure 12- 6. Suppose this firm is being regulated using the policy of marginal- cost pricing. The resulting price and output would be
A) P1 and Q2.
B) P2 and Q2.
C) P1 and Q1.
D) P3 and Q2.
E) P3 and Q1.

Question

The diagram below shows the market demand curve and the cost curves for a single firm.  FIGURE 12- 6
-Refer to Figure 12- 6. Suppose this firm is being regulated using the policy of marginal- cost pricing. The resulting price and output would be
A) P1 and Q2. 
B) P2 and Q2. 
C) P1 and Q1. 
D) P3 and Q2. 
E) P3 and Q1.

Quizplus · Accepted Answer

The correct answer is A because marginal-cost pricing sets the price equal to the marginal cost, which is P1, and the output is Q2.

The Diagram Below Shows the Market Demand Curve and the Cost