Question 17
Market StructuresIn the diagram above, what is the lowest possible price the monopolist could charge and still break even without there being excess demand?
- A.P1
- B.P2
- C.P3
- D.P4
Show the answer and explanation
Answer: A (P1)
Explanation
To break even, price must equal average total cost. The demand curve cuts ATC at output Z, price P1; there quantity demanded equals output, so there is no excess demand.