Use the Information Below to Answer the Following Questions

question 69

Multiple Choice

Use the information below to answer the following questions.
Fact 13.5.1
Cascade Springs Inc. is a natural monopoly that bottles water from a spring high in the Rocky Mountains. The total fixed cost it incurs is $80,000, and its marginal cost is 10 cents a bottle. The demand curve for Cascade Springs bottled water is shown in the following figure:

Figure 13.5.1
-Refer to Figure 13.5.1. Suppose the firm is regulated by the government that imposes marginal cost pricing. The price of a bottle of water is

• A)$0.
• B)$0.50.
• C)$0.30.
• D)$0.10.
• E)$0.20.

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Definitions:

Fundamental Attribution Error

The tendency to overemphasize personality traits and underestimate situational factors when explaining others' behaviors.

Availability Heuristic

A cognitive rule of thumb that says that the perceived probability of an event or the importance assigned to it is based on its availability in memory.

Augmenting Principle

A principle in attribution theory suggesting that if an event occurs despite the presence of strong opposing forces, we should attribute the event to the actions of the agent.

Self-Fulfilling Prophecy

A prediction that directly or indirectly causes itself to become true due to positive feedback between belief and behavior.