FIGURE 12- 1 Consider Three Firms,A,B and C,all Producing Kilos

question 19

Multiple Choice

FIGURE 12- 1 Consider three firms,A,B and C,all producing kilos of potatoes (per year) in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms.

-One method of regulating a natural monopoly is known as average- cost pricing.Using this method,the regulator requires that the price be set equal to

• A)internal cost.
• B)average fixed cost.
• C)average variable cost.
• D)marginal cost.
• E)long- run average cost.

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Definitions:

Discretionary Policy

Economic policies based on the discretionary judgment of policymakers rather than set rules, often involving fiscal or monetary actions.

Budget Deficit

This occurs when a government's expenditures exceed its revenues during a specific budget period, leading to borrowing or using saved reserves.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary depending on income levels or the type of goods and services.

Tax Revenues

The income that is received by a government from taxpayers, used to fund public services and government operations.