The Following Figure Shows the Average Cost [AC],marginal Cost [MC],and

question 16

Multiple Choice

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
-In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

• A)negative economic profit equal to P₃CBP₂.
• B)positive economic profit equal to P₂BQ₂O.
• C)negative economic profit equal to FBQ₂Q₁.
• D)positive economic profit equal to FCQ₂Q₁.

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Definitions:

Nash Equilibria

Nash Equilibria are concepts in game theory where each player's chosen strategy maximizes their payoff, given the strategies chosen by other players, indicating no incentive to deviate unilaterally.

Maximin Strategy

A decision-making rule used in the face of uncertainty, prioritizing the maximization of the minimum possible payoff.

Credible Threat

A declaration or indication of intended action that is believable and likely enough to influence others' behaviors or decisions.

Warranty

A promise or guarantee made by a seller to a buyer to repair or replace a product that is found to be defective within a specified period.