Suppose a monopolist has costs such that when output is 500 units per hour, average costs are $3. If the monopolist is regulated by a policy of average-cost pricing, the monopolist will charge a price of:
A. $3.
B. $3 only if the quantity demanded is 500 units per hour at a price of $3.
C. $3 only if the quantity demanded is greater than 500 units at a price of $3.
D. $3 only if the quantity demanded is less than 500 units per hour at a price of $3.
Answer: B
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