If a Regulatory Agency Ordered a Public Utility (A Natural

question 40

Multiple Choice

If a regulatory agency ordered a public utility (a natural monopoly) to price all of its output at marginal cost, then the firm

• A) would incur losses since the demand curve is perfectly elastic.
• B) could incur profits or losses depending on the position of the demand curve and the ATC curve.
• C) would lose money unless it is subsidized.
• D) would have to shut down.
• E) would earn profits since the demand curve is perfectly inelastic.

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Definitions:

Knights of Labor

A significant labor organization in the United States during the 19th century that sought to organize workers across different industries to improve working conditions.

Unions

Organizations formed by workers to protect their rights, negotiate collective contracts, and provide support to members on employment matters.

National Labor Union

A historic labor federation in the United States, founded in 1866, that aimed to unify workers across different trades to fight for labor reforms.

Trades

Occupations that typically require specialized skills and knowledge, learned through on-the-job experience or formal training, often involving manual work and craftsmanship.