If a Monopolist Is Forced to Set Price Equal to Average

question 112

Multiple Choice

If a monopolist is forced to set price equal to average total cost, economic profit

• A)will be negative, and the monopolist may go out of business
• B)will be zero
• C)will be positive
• D)will be negative, and the firm will stay in business if there are significant fixed costs
• E)may be positive, negative, or zero

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Definitions:

Multiple Periods

Refers to accounting or financial analysis over several time frames, such as quarters or years, to evaluate performance or investments.

Double-Declining-Balance Depreciation

A method of accelerated depreciation where the asset's book value is reduced at double the rate of traditional straight-line depreciation.

Straight-Line Depreciation

A method of allocating an asset's cost evenly across its useful life.

Income Tax Rate

This is the percentage at which an individual or corporation is taxed on their income.