The Rail System in Metropolis Is a Natural Monopoly

question 71

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)Profit will be zero under regulation.
• B)Only normal profit will be earned under regulation.
• C)Accounting profit will be zero under regulation.
• D)Economic loss will occur under regulation.
• E)Profit will be higher than if the monopoly were unregulated.

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Definitions:

Short-Termism

The focus on immediate gains or results at the expense of long-term strategy, sustainability, or investment. Often criticized in business and investment contexts.

Western Companies

Businesses that are based in or originated from Western countries, typically including countries in North America and Western Europe.

Revoking

The act of withdrawing, canceling, or annulling something previously granted, such as a privilege, right, or offer.

Liquidating

The process of converting assets into cash often during the closure of a business.