Exhibit 13-3 A monopolist
-In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to marginal cost, then:
A) this firm would earn excess profit.
B) price would equal ATC.
C) the firm would suffer losses.
D) revenue would just be sufficient to cover costs.
E) total revenue would just cover marginal cost.

Question

Exhibit 13-3 A monopolist 
-In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to marginal cost, then:
A) this firm would earn excess profit. 
B) price would equal ATC. 
C) the firm would suffer losses. 
D) revenue would just be sufficient to cover costs. 
E) total revenue would just cover marginal cost.

Quizplus · Accepted Answer

When price is set equal to marginal cost in a regulated industry, the firm may not cover its average total costs, leading to losses.

Exhibit 13-3 a Monopolist