If a Natural Monopoly Does Not Inflate Its Costs, the Output

question 339

Multiple Choice

If a natural monopoly does not inflate its costs, the output it produces is the smallest when the monopoly is

• A) left unregulated.
• B) regulated according to an average cost pricing rule.
• C) regulated according to a marginal cost pricing rule.
• D) regulated to maximize total surplus.

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Definitions:

Trade Discount

A reduction in the listed price of goods or services offered by a vendor to buyers in the same trade.

Personal Video Recorder

An electronic device or software application that records video in a digital format to a disk drive or other memory medium within a device.

Suggested Retail Price

The price that manufacturers recommend retailers to sell their products for to consumers.

Mark-Up

The markup on goods’ cost intended to defray overhead expenditures and yield profit.