The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3

-Refer to Figure 9-3. If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?
A) P6 and Q4
B) P5 and Q2
C) P3 and Q1
D) P2 and Q2

Question

The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3
 
-Refer to Figure 9-3. If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?
A) P6 and Q4 
B) P5 and Q2 
C) P3 and Q1 
D) P2 and Q2

Quizplus · Accepted Answer

Marginal-cost pricing means setting the price equal to the marginal cost. In the context of a monopoly, this typically results in a price and output combination where the price is lower and the output is higher than the unregulated monopoly equilibrium. In this scenario, P6 and Q4 represent the price and output where the price equals the marginal cost.

The Following Diagram Contains Information on Cost and Revenue Curves