In the Long Run,the Imposition of Average-Cost Pricing in Natural

question 58

Multiple Choice

In the long run,the imposition of average-cost pricing in natural monopolies,such as Manitoba Hydro and New Brunswick Power,would generally lead to

• A)allocative efficiency.
• B)productive efficiency.
• C)distorted investment decisions.
• D)a reduction in the output by these firms.
• E)both allocative efficiency and productive efficiency.

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Definitions:

Bond Issuer

The entity, either a corporation or a government, that borrows funds by selling bonds and is obligated to pay interest on them as well as repay the principal amount at maturity.

Closed Economy

An economy that does not engage in international trade with other economies, neither importing nor exporting goods and services.

Government Deficit

The financial situation in which a government's expenditures exceed its revenues within a given fiscal period, leading to borrowing or debt accumulation.

Private Saving

The portion of households' income that is not consumed or paid in taxes, and is instead saved for future use.