microecon question!

[NuclearFusi0n]

If government regulators want a natural monopolist to earn only zero economic profit, then they will set price equal to:
A. marginal cost (MC).
B. average variable cost (AVC).
C. average fixed cost (AFC).
D. average total cost (ATC).

 

[theNEOone]

dood, do you pay attention in class, lol. it's a). they set p=MC. (this is the same outcome as in a perfectly competitive market)


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[Dudd]

If I remember correctly back to last year, it would be D. You can't make any money if your revenue is the same as your total cost.

 

[Legendary]

Originally posted by: theNEOone
dood, do you pay attention in class, lol. it's a). they set p=MC. (this is the same outcome as in a perfectly competitive market)


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Exactly, P = MC = MR = Perfectly competitive market = no profits in the long run.

 

[NuclearFusi0n]

Doesn't p=MC make the monopolist earn a negative economic profit?

and no, i don't pay attention. at all. if i go.

 

[theNEOone]

Originally posted by: NuclearFusi0n
Doesn't p=MC make the monopolist earn a negative economic profit?

and no, i don't pay attention. at all. if i go.

well, it would depend on your econ prof and what she/he takes into account when she's talking about "economic profit." the question is pretty bare though, and doesn't provide much info so that's why i provided the answer p=mc. besides, the firm would shut down if it makes anything less than 0 economic profit.


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[Feldenak]

Originally posted by: NuclearFusi0n
Doesn't p=MC make the monopolist earn a negative economic profit?

and no, i don't pay attention. at all. if i go.

Then I have no pity for you.

 

[Dudd]

Scroll down, it gives the answer (look for normal profit)

 

[Syringer]

Originally posted by: Dudd
If I remember correctly back to last year, it would be D. You can't make any money if your revenue is the same as your total cost.

That's what I thought too. P = Mc would be the optimal point where profits are maximized or losses are minimized.