If a monopoly sets a price equal to average total cost, what is the expected outcome?

When a monopoly sets its price equal to average total cost, it is expected to earn zero profit. This occurs because the price at which it sells its product covers all its costs, including both fixed and variable costs, resulting in a situation where total revenue equals total cost.

In microeconomic theory, zero economic profit means the firm is covering its average total costs but is not making any additional profit beyond what is necessary to keep the firm in operation in the long term. This situation is similar to what is observed in perfect competition, where firms operate at a break-even point in the long run.

By setting the price at average total cost, the monopoly eliminates the incentive for new firms to enter the market, since there are no excess profits to attract competitors. Therefore, while the monopoly may not incur losses or earn positive profits, it retains its market singularity without the threat of competition due to the absence of economic profit.