Exhibit 15-1 -If Regulators Set Price Equal to Marginal Cost for the Cost

question 179

Multiple Choice

Exhibit 15-1
-If regulators set price equal to marginal cost for the natural monopoly in Exhibit 15-1, then from the usual profit-maximizing position, price changes from

• A) $24 to $18, and quantity increases from 5 to 8
• B) $14 to $20, and quantity increases from 5 to 8.
• C) $24 to $18, and quantity remains unchanged
• D) $24 to $18, and quantity increases from 5 to 8,
• E) $24 to $22, and quantity increases from 5 to 10

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Definitions:

Excise Tax

A type of tax imposed on specific goods, services, or activities, often included in the price of products like gasoline, alcohol, and tobacco.

Tax Borne

The final economic burden of a tax, indicating who ultimately bears the cost of taxation.

Wage Tax

A tax imposed on employees' earnings, typically deducted from their paychecks by the employer and paid to the government.

Labor Market

The economic marketplace where workers seek employment and employers seek to hire workers, influenced by factors like supply, demand, and wages.