JAMB Economics 2013 Paper

Concept:A monopolist earns economic profit when price is above average cost, so profit is eliminated when price equals average cost.Explanation:Total profit is calculated as total revenue minus total cost.For quantity $Q$, profit is $(P \times Q) - (AC \times Q) = Q(P - AC)$.Profit is positive when $P > AC$.Profit becomes zero when $P = AC$.Setting price equal to marginal cost ($P = MC$) gives efficiency but does not guarantee zero profit.Only when price covers the average cost of production does the monopolist break even.Therefore, monopoly profit is eliminated where price equals average cost.Answer:C. AC