Exhibit 13-3 A monopolist

In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to average total cost, then:

Question

Exhibit 13-3 A monopolist

In Exhibit 13-3, if this industry is regulated and the regulatory commission sets price equal to average total cost, then:

Quizplus · Accepted Answer

If the regulatory commission sets price equal to average total cost, the firm would only earn enough revenue to cover its costs. There would be no excess profit, and the firm would not suffer losses. This pricing strategy is known as "cost-plus" regulation, and it is designed to ensure that the firm does not earn excessive profits but can still cover its costs and earn a reasonable rate of return.

Exhibit 13-3 a Monopolist