question archive For a theoretical natural monopolist with down-sloping average total cost (ATC) curve: a
For a theoretical natural monopolist with down-sloping average total cost (ATC) curve: a
Subject:MarketingPrice:2.88 Bought3
For a theoretical natural monopolist with down-sloping average total cost (ATC) curve:
a. If government sets a price below the unregulated monopolist price, but above the firm's ATC, the profit-maximizing monopolist firm will go out of business and not produce any output.
b. If the government sets a price below the unregulated monopolist price, but above the firm's ATC, the profit-maximizing monopolist firm will decrease its level of output.
c. If the government sets a price below the unregulated monopolist price, but above the firm's ATC, this will not change the profit-maximizing monopolist firm's level of output.
d. If the government sets a price below the unregulated monopolist price, but above the firm's ATC, the profit-maximizing monopolist firm will increase its level of output.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer: D
As long as government sets price above the firm's ATC, it will remain in business. That being being said, you set the price below the unregulated monopolist price but above the firm's ATC they will increase the level of output. This is because the firm was initially artificially limiting output to boost prices. If government lowered that price, the firm has a decreased incentive to reduce output and thus will produce more instead.
