A disadvantage of requiring a monopoly to set a price equal to average total cost is that firms may:
A) lose money.
B) not have an incentive to minimize cost.
C) find that costs are too high.
D) find that its profits will escalate.

Question

Quizplus · Accepted Answer

Requiring a monopoly to set a price equal to average total cost removes the incentive for the firm to minimize costs, as they can pass these costs directly onto consumers without affecting their ability to cover costs.

A Disadvantage of Requiring a Monopoly to Set a Price