When a firm uses average total cost pricing, the price is
A)equal to marginal cost.
B)below the firm's marginal cost.
C)below the unregulated monopoly price.
D)equal to the unregulated monopoly price.
E)above the unregulated monopoly price.

Question

Quizplus · Accepted Answer

When a firm uses average total cost pricing, the price is set to cover all costs, including fixed and variable costs, which typically results in a price below the unregulated monopoly price. Monopolies without regulation tend to price at the profit-maximizing level, which is usually higher than the average total cost to maximize profits.

When a Firm Uses Average Total Cost Pricing, the Price