Suppose a monopolist has costs such that when output is 1,000 units per hour, average cost is $5. If the monopolist is regulated by a policy of average-cost pricing, the monopolist will charge a price of:
A. $5.
B. $5 only if the quantity demanded is 1,000 units per hour at a price of $5.
C. $5 only if the quantity demanded is greater than 1,000 units at a price of $5.
D. $5 only if the quantity demanded is less than 1,000 units per hour at a price of $5.
Answer: B
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