Figure 15-15

Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.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 ________.

Question

Figure 15-15
  
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.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 ________.

Quizplus · Accepted Answer

If the government regulates Erickson Power Company, it will set the price equal to the firm's average total cost (ATC) at the output level where the demand curve intersects the ATC curve, which is point E. This price is P2 and the output level is Q3. Therefore, the correct answer is (B) P2, Q3.

Figure 15-15 Figure 15-15 Shows the Cost and Demand Curves for the and Demand