Top Posters
Since Sunday
17
s
5
j
4
s
4
C
3
W
3
a
3
H
3
s
3
a
3
o
3
K
3
New Topic  
BrandyBraden BrandyBraden
wrote...
Posts: 63
Rep: 0 0
5 months ago

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

Short description: A graph plots output against price. Long description: The horizontal axis representing output lists the following values from left to right: Q subscript 1 and Q subscript 2. The vertical axis representing dollars lists the following values from bottom to top: P subscript 1, P subscript 2, and P subscript 3. The graph plots three curves and five points. The points are as follows: a (Q subscript 1, P subscript 3), b (Q subscript 2, P subscript 2), c (Q subscript 2, P subscript 1), d (Q subscript 1, P subscript 2), and e (Q subscript 1, P subscript 1). The curve, LRAC passes through the following points: a and b. The curve, MC passes through the point, c. The curve, D passes through the following points: a and c. Curve, D intersects the curves, LRAC and MC at points, a and c.

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.
Textbook 

Microeconomics


Edition: 17th
Author:
Read 12 times
1 Reply
Replies
Answer verified by a subject expert
elbrundoelbrundo
wrote...
Posts: 61
Rep: 1 0
5 months ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
the result is allocatively inefficient because price exceeds marginal cost.

1

Related Topics

BrandyBraden Author
wrote...

5 months ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
wrote...

Yesterday
Just got PERFECT on my quiz
wrote...

2 hours ago
Brilliant
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  270 People Browsing
 298 Signed Up Today
Related Images
  
 22823
  
 1652
  
 9296
Your Opinion
Which 'study break' activity do you find most distracting?
Votes: 454