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Author Question: When electric utilities are regulated using an average cost pricing rule, they will earn zero ... (Read 49 times)

Jkov05

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on: Jun 29, 2018
When electric utilities are regulated using an average cost pricing rule, they will earn zero economic profit. Is the previous statement correct or incorrect? Why?
 
  What will be an ideal response?

Question 2

The value of the marginal product of labor is given by:
 
  A) the ratio of the marginal product of labor to the wage rate.
  B) the product of the marginal product of labor and the wage rate.
  C) the ratio of the marginal product of labor to the price of the final good produced.
  D) the product of the marginal product of labor and the price of the final good produced.


AISCAMPING

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The statement is correct. An average cost pricing rule requires that the firm set its price equal to its average total cost. When price equals average total cost, the firm earns zero economic profit.

Answer to Question 2

D


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