Table 10.5,which is data for a monopolist.

-Refer to Table 10.5 to answer this question.What would be the output and price if this firm was regulated and required to charge a fair-return price?
A)4 and $52.
B)4 and $64.
C)5 and $60.
D)6 and $56.
E)9 and $44.

Question

Table 10.5,which is data for a monopolist.
 
-Refer to Table 10.5 to answer this question.What would be the output and price if this firm was regulated and required to charge a fair-return price?
A)4 and $52. 
B)4 and $64. 
C)5 and $60. 
D)6 and $56. 
E)9 and $44.

Quizplus · Accepted Answer

A fair-return price for a monopolist is where price equals average total cost (ATC). Looking at the table, we can see that ATC equals $12 when output is 5. Therefore, if the firm is regulated to charge a fair-return price, it will produce 5 units of output and charge a price of $60 (which is equal to ATC at that level of output). Therefore, the correct answer is C.

Table 10.5,which Is Data for a Monopolist