Consider a Regulated Natural Monopoly, Such as an Electricity Distribution

question 71

Multiple Choice

Consider a regulated natural monopoly, such as an electricity distribution company, that faces falling long- run average costs. If it is forced to price its output at average cost it will provide

• A) less output than what is socially optimal.
• B) so little output that there will be a shortage.
• C) the socially optimal amount of output.
• D) more output than what is socially optimal.
• E) more output than can be absorbed by the market.

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Definitions:

Spongy Bone

A type of bone tissue with a porous structure, found at the ends of long bones and in the inner layers of other bones, facilitating movement and shock absorption.

Compact Bone

A dense and hard type of bone tissue that makes up the outer layer of bones, providing strength and structure.

Dense Bone

Dense or compact bone is a hard, outer layer of bone that provides strength and protection.

Spongy Bone

A type of bone tissue that has a porous structure, providing flexibility and acting as a shock absorber within bones.