A Local Cable Company Has Its Rates Set at P

question 155

Multiple Choice

A local cable company has its rates set at P = $15 by a regulatory commission. Its current output is 10,000 households and its costs are as follows: ATC = $17; AVC = $14; and MC = $15. From this, we can tell that this is:

• A) a fair price, and the firm earns a normal profit.
• B) a fair price, and the firm earns an economic loss.
• C) marginal cost pricing, and the firm earns a normal profit.
• D) marginal cost pricing, and the firm earns an economic loss.
• E) the same price that an unregulated monopolist would charge.

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