If the government regulates a monopoly's price to marginal cost, in the long run
A)the monopolist will earn a profit if ATC MC.
B)the monopolist will exit the industry.
C)the monopolist will earn a profit if ATC P.
D)the monopolist will earn zero profits.

Question

If the government regulates a monopoly's price to marginal cost, in the long run
A)the monopolist will earn a profit if ATC > MC.
B)the monopolist will exit the industry.
C)the monopolist will earn a profit if ATC > P.
D)the monopolist will earn zero profits.

Quizplus · Accepted Answer

If the government regulates a monopoly's price to marginal cost, the monopolist will not be able to cover its average total costs if ATC > MC, leading to losses and potential exit from the industry in the long run.

If the Government Regulates a Monopoly's Price to Marginal Cost