The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
-Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Question

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3

-Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Quizplus · Accepted Answer

Marginal-cost pricing occurs when a monopoly sets its price equal to its marginal cost. In the graph, the MC curve intersects the demand curve at point B, which corresponds to a quantity of Q1 and a price of P1. Therefore, the equilibrium price would be P₂.

The Following Figure Shows the Average Cost [AC],marginal Cost [MC],and