The Rail System in Metropolis Is a Natural Monopoly

question 102

Multiple Choice

The rail system in Metropolis is a natural monopoly.If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?

• A)Price and output will be higher than if the monopoly were unregulated.
• B)Price and output will be lower than if the monopoly were unregulated.
• C)Price will be lower and output higher than if the monopoly were unregulated.
• D)Price will be higher and output lower than if the monopoly were unregulated.
• E)Profit will be lower than if the monopoly were unregulated, but price and output could either increase or decrease.

---

Definitions:

Continuity

The concept that certain processes or developments occur in a smooth, uninterrupted manner over time.

Proximity

Nearness in space, time, or relationship.

Similarity

The state of being alike or sharing common features, used in various contexts to describe resemblance or equivalence between entities.

Closure

The psychological need to seek resolution and a sense of completeness or finality in our perceptions and relationships.