CFA Practice Question

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CFA Practice Question

If a regulatory commission sets a monopolist's price at the level where the demand curve intersects the firm's average total cost curve, the firm would ______

A. earn economic profit.
B. incur losses and eventually go out of business.
C. earn only a normal profit.
Correct Answer: C

User Contributed Comments 2

User Comment
sharky7 Is this because since P=ATC , economic profit = 0, and normal profit is that profit that makes the economic profit 0?
nabada0419 sharky7, you are right. The firm will earn zero economic profit = normal profit.
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