Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
-In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.

Question

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.

-In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.

Quizplus · Accepted Answer

At a maximum price of P₁, the demand curve intersects the average cost (AC) curve at point Q1. This means that the firm will be able to produce at a price where the average cost is equal to the price, resulting in zero economic profit. Therefore, the firm will produce the quantity where the marginal cost (MC) curve intersects with the demand curve, which is Q1. If the price were to increase further, the demand would decrease, and the profits of the firm would decrease. Therefore, producing at Q1 is the best option for the firm in this scenario.

Use the Following Table to Answer the Question : Table