If a regulatory agency mandates that natural monopoly charge a price equal to it

Question

If a regulatory agency mandates that natural monopoly charge a price equal to its average cost

A) the firm will earn economic profits greater than zero B) the firm will earn ecomomic profits equal to zero C) the firm will eventually exit the industry D) other firms will find it profitable to enter this industry

Suppose a monopolist has costs such that when output is 500 units per hour, average costs are $3 If the monopolist is regulated by a policy of average-cost pricing, the monopolist will charge a price of

A) $3 only if the quantity demanded is grater than 500 units at a price of $3 B) $3 only if the quantity demanded is 500 units per hour at a price of $3   C) $3 only if the quantity demanded is less than 500 units per hour at a price of $3   D) $3

Explanation / Answer

Here the answers

1. B) the firm will earn economic profits equal to zero.

2. A) $3 only if the quantity demanded is grater than 500 units at a price of $3

Hope these help :)

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