Biology Forums - Study Force

The diagram below shows the market demand curve and the cost curves for a single firm.



FIGURE 12-7

Refer to Figure 12-7. Suppose this firm is being regulated using a policy of average-cost pricing. In this case,

▸ the result is allocatively inefficient because price exceeds marginal cost.

▸ the result is allocatively efficient because economic profits are zero.

▸ the level of output is too low, but the price is allocatively efficient.

▸ the result is allocatively inefficient because the marginal cost curve is downward sloping.

▸ the result is as close to the competitive outcome as possible.

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