If We Compare Regulating a Natural Monopoly Using a Marginal

question 69

Multiple Choice

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule, we see that output is

• A) greater with marginal cost pricing, but average cost pricing allows for costs to be covered.
• B) the same under both cases, but the profit is greater with average cost pricing.
• C) the same but profits are greater with marginal cost pricing.
• D) greater with marginal cost pricing, and the firm's profit is larger with marginal cost pricing.
• E) greater under average cost pricing, but profits are greater with marginal cost pricing.

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Definitions:

Slaughterhouse Cases

A set of 19th-century Supreme Court cases dealing with the rights of citizens under the Fourteenth Amendment post-Civil War, significant for their interpretations of federal versus state powers.

State Governments

The governing bodies of individual states within a federal system, responsible for local laws, policies, and administration.

Fourteenth Amendment

An amendment to the U.S. Constitution, ratified in 1868, granting citizenship to all persons born or naturalized in the United States and guaranteeing all citizens equal protection of the laws.

Carpetbagger

A derogatory term originally used to describe Northerners who moved to the South after the American Civil War to profit from the Reconstruction.