Figure 13.9

Figure 13.9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 13.9.If the government regulates Erickson Power Company so that the firm can earn a normal profit, the price would be set at ________ and the output level is ________.
A)P₁; Q₄
B)P₂; Q₃
C)P₂; Q₂
D)P₃; Q₂

Question

Figure 13.9
  
Figure 13.9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 13.9.If the government regulates Erickson Power Company so that the firm can earn a normal profit, the price would be set at ________ and the output level is ________.
A)P₁; Q₄ 
B)P₂; Q₃ 
C)P₂; Q₂ 
D)P₃; Q₂

Quizplus · Accepted Answer

A normal profit occurs where price equals average total cost. In this scenario, the price P₂ and output Q₃ would allow the firm to cover all its costs, including opportunity costs, thus earning a normal profit.

Figure 13.9 Figure 13.9 Shows the Cost and Demand Curves for the and Demand