If Government Regulators Guarantee That a Natural Monopoly Will Earn

question 111

Multiple Choice

If government regulators guarantee that a natural monopoly will earn normal profits, then

• A)the monopolist has little or no incentive to hold down its costs.
• B)the monopolist has a sharp incentive to hold down its costs so as to increase profits.
• C)the monopolist will probably try its best to maintain its costs at the current level.
• D)it is impossible to determine the monopolist's incentives regarding costs before the firm actually incurs some changes in its costs.

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Definitions:

Withdraw

The act of formally leaving a particular status or position, such as removing oneself from a legal case or retracting a statement.

Limited Partnerships

Business arrangements where at least one partner has unlimited liability while others have liability limited to the extent of their investments.

General Partners

Individuals in a partnership who are responsible for managing the business and are personally liable for the partnership's debts.

Limited Liability

A legal structure where a company's owners are protected from personal responsibility for the company’s debts or liabilities, beyond the amount of their investment in the company.