Consider the Case of a Natural Monopoly with Falling Long-Run

question 68

Multiple Choice

Consider the case of a natural monopoly with falling long-run average costs.If regulation sets the price equal to marginal cost,then

• A)the firm would operate at a loss and eventually go out of business.
• B)shortages would result.
• C)the demand curve would shift to the left.
• D)the firm would earn economic profits.
• E)the outcome would be allocatively inefficient.

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Definitions:

Herzberg's Motivation-Hygiene Theory

A theory suggesting that job satisfaction and dissatisfaction arise from different sets of factors, where motivation factors increase satisfaction and hygiene factors prevent dissatisfaction.

Motivation

Refers to the factors and forces that drive an individual to engage in particular behaviors or pursue certain goals.

Satisfying

Fulfilling or meeting expectations, needs, or desires.

Parkinson's Law

The adage that "work expands to fill the time available for its completion," suggesting efficiency decreases as the amount of time allowed increases.