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 ______
B. incur losses and eventually go out of business.
C. earn only a normal profit.
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. |