Which of the Following Is True When Regulators Require a Natural

question 9

Multiple Choice

Which of the following is true when regulators require a natural monopolist to set price equal to marginal cost?

• A)This policy results in a less than socially optimal allocation of resources.
• B)The marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit.
• C)The monopolist will face recurring losses unless a subsidy is provided.
• D)The monopolist will earn a normal profit.
• E)The monopolist will earn more than a fair return.

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Definitions:

Vocational School

An educational institution designed to provide vocational education, or technical skills required to perform the tasks of a particular and specific job.

Revenue Variances

Differences between actual revenue and budgeted or forecasted revenue figures.

Budgets

Financial plans that estimate future income, expenditures, and resources over a specific period.

Standard Cost System

A cost accounting system that compares actual costs to predetermined or standard costs to help in budgeting and variance analysis.