If the monopoly price is equal to average cost, the firm ___________.

earns monopoly profits

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suffers losses

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earns normal profits

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earns either profit or loss

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Solution

The correct option is D earns normal profits
As the Monopoly firm is the price maker he will choose to set a price above its total cost.
Since the monopoly price is equal to average cost, thus the monopoly firm earns "normal profits".

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Similar questions

In the long run, firms under monopoly or oligopoly must only earn normal profits. State true or false.

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