CFA Practice Question

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CFA Practice Question

Refer to the graph below. If the price of the product is $1 and the firm is a natural monopoly, ______

A. there will be a surplus of the product.
B. the firm will earn economic profit by satisfying the market quantity demanded at that price.
C. the firm can earn profit by producing more than Qc.
D. the firm will incur losses by producing the quantity demanded at that price.
Correct Answer: D

Price is below average total cost at the perfectly competitive output level Qc.

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