-The figure above shows the demand curve (D) faced by Visual, Inc., a cable TV company, and the firm's marginal revenue (MR), marginal cost (MC), and average cost (LRAC) curves. If Visual is regulated according to an average cost pricing rule, it will serve ________ million households and set a price of ________ per household per month.
A) 1; $48
B) 4; $12
C) 2; $36
D) 3; $24

Question

-The figure above shows the demand curve (D) faced by Visual, Inc., a cable TV company, and the firm's marginal revenue (MR), marginal cost (MC), and average cost (LRAC) curves. If Visual is regulated according to an average cost pricing rule, it will serve ________ million households and set a price of ________ per household per month.
A) 1; $48 
B) 4; $12 
C) 2; $36 
D) 3; $24

Quizplus · Accepted Answer

Under average cost pricing, the firm sets the price equal to the average cost (LRAC) where it intersects the demand curve. This occurs at 3 million households with a price of $24.

-The Figure Above Shows the Demand Curve (D) Faced by Visual