Figure 15-9
Figure 15-9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-9.Why won't regulators require that Erickson Power produce the economically efficient output level?
A) because there is insufficient demand at that output level
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit
C) because Erickson Power will earn zero profit
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run

Question

Figure 15-9  
Figure 15-9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-9.Why won't regulators require that Erickson Power produce the economically efficient output level?
A) because there is insufficient demand at that output level 
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit 
C) because Erickson Power will earn zero profit 
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run

Quizplus · Accepted Answer

At the economically efficient output level, price equals marginal cost, which may be below average total cost, leading to losses for Erickson Power.