One Method of Regulating a Natural Monopoly Is Known as Average-

question 87

Multiple Choice

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 average

• A) internal cost.
• B) variable cost.
• C) total cost.
• D) marginal cost.
• E) fixed cost.

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Definitions:

Wage Rate

The amount of compensation a worker receives per unit of time or output, often expressed per hour or piece.

Price Floor

A government-imposed minimum price above the market equilibrium price, preventing the price of a good or service from falling below this level.

Equilibrium Price

The equilibrium price is the market price at which the supply of an item equals its demand, leading to stable market conditions.

Market Imbalances

Situations where the quantity supplied of a good does not equal the quantity demanded, leading to surpluses or shortages.