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:

Decision-Making

The process of selecting the best course of action from multiple alternatives to achieve a desired goal or solve a problem.

Management Function

Activities and responsibilities undertaken by managers to plan, organize, lead, and control resources to achieve specific organizational goals.

Controlling

The process of monitoring, comparing, and correcting plan performance to ensure that organizational goals are achieved efficiently and effectively.

Product Cost

The total costs incurred to create a product, including direct labor, direct materials, and overhead expenses.