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 in the market is P₁,output levels below Q₁ will: A)yield more economic profit than at Q₁. B)yield positive but lesser economic profit than at Q₁. C)yield negative economic profit. D)yield zero economic profit.

Question

Quizplus · Accepted Answer

If the output levels are below Q₁, the natural monopoly will operate at a higher average cost than the market price. This means that economic profit will be negative and the firm will incur losses. Therefore, the best choice is C, yield negative economic profit.

Use the Following Table to Answer the Question : Table