If the regulation of a monopoly results in a price equal to marginal cost but the price is below average total cost:
A)the firm can still make an economic profit.
B)the firm will earn only a zero economic profit.
C)efficiency in allocation will be less.
D)the firm will need subsidies to stay in business.

Question

Quizplus · Accepted Answer

When the price is set equal to marginal cost but below average total cost, the firm cannot cover its total costs, leading to losses. To continue operating without incurring losses, the firm would need subsidies.

If the Regulation of a Monopoly Results in a Price