Economics (AS & A Level) · Feb / March 2021 · Paper 32 · Question 13

A government is attempting to achieve allocative efficiency in a nationalised industry. [diagram: price/quantity graph with curves AC, MC, AR, MR and price levels W, X, Y, Z] What will the government do?

1. AIt will set price at W and make sub normal profit.
2. BIt will set price at X and the firm will make supernormal profits.
3. CIt will set price at Y and make normal profits.
4. DIt will set price at Z and make a loss.

As printed in the paper