-If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the firm's economic profit will be
A) $9 million.
B) $12 million.
C) $0, that is, the firm's owners make only a normal profit.
D) negative, that is, the firm incurs an economic loss.

Question

-If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the firm's economic profit will be
A) $9 million. 
B) $12 million. 
C) $0, that is, the firm's owners make only a normal profit. 
D) negative, that is, the firm incurs an economic loss.

Quizplus · Accepted Answer

Under an average cost pricing rule, the price is set equal to the average cost, allowing the firm to cover all its costs, including a normal profit, but not to earn an economic profit.

-If an Average Cost Pricing Rule Is Imposed on the Natural