A Regulatory Agency That Imposes a Price Ceiling in Order

question 150

Multiple Choice

A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a "fair rate of return" is forcing the monopolist to sell at a price equal to

• A) average fixed cost.
• B) average total cost.
• C) marginal cost.
• D) average variable cost.

---

Definitions:

Product Cost Concept

The product cost concept encompasses all costs associated with the creation of a product, including materials, labor, and overhead, used for pricing and inventory valuation.

Opportunity Cost

The forfeit of potential benefits from different options when a specific choice is made.

Revenue Forgone

The potential income that is given up when choosing one alternative over another; essentially, it's the opportunity cost of revenue not earned.

Differential Analysis

A decision-making process that looks at the difference in costs and benefits between alternative choices.