Public Utility Regulator's Instructions to Use Price Discrimination or Block

question 32

Multiple Choice

Public utility regulator's instructions to use price discrimination or block pricing is designed to:

• A) allow utilities increases in the quantity of output and the firm's profit.
• B) limit the profits of a utility.
• C) reduce all of the prices charged by a natural monopoly like a public utility.
• D) allow for more service while reducing profit of a natural monopoly.
• E) assure that profit will be only normal and increase the quantity of output.

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Definitions:

Marginal Productivity

The additional output generated by employing one more unit of a particular resource, while holding other inputs constant.

Returns to Scale

The rate at which production output increases in response to proportional increases in all inputs.

Average Cost

The average cost is the total cost of production divided by the number of units produced, reflecting the cost per unit of output.

Marginal Cost

The supplementary expenditure required to produce an extra unit of a product or service.