The Diagram Below Shows the Market Demand Curve and the Cost

question 20

Multiple Choice

The diagram below shows the market demand curve and the cost curves for a single firm. FIGURE 12-6
-Refer to Figure 12-6.Suppose this firm is being regulated using a policy of marginal-cost pricing.To maintain the resulting level of output

• A)the government would have to subsidize the firm or it will eventually shut down.
• B)the regulator would have to allow the firm to keep the monopoly profits at this level of output.
• C)the government would have to accept the allocative inefficiency associated with this level of output.
• D)the average total cost curve would have to shift up.
• E)the demand curve would have to the left.

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Definitions:

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