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JAMB Economics 2011 Question 25

Question 25

Market Structures

The profit of a monopolist can be eliminated where price equals

  1. A.AFC
  2. B.MC
  3. C.AC
  4. D.AVC.
Show the answer and explanation

Answer: C (AC)

Explanation

Profit per unit = price − average cost. If price is set equal to AC, the monopolist earns no abnormal profit.