If a Natural Monopoly Faces a Relatively Inelastic Consumer Demand

question 32

Multiple Choice

If a natural monopoly faces a relatively inelastic consumer demand over the range of the production, it will have an incentive to:

• A) charge a low price.
• B) charge a high price.
• C) sell more.
• D) advertise more.

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Definitions:

Desert Island

An uninhabited or deserted island, often depicted in literature and movies as a remote, isolated place.

Competitive Equilibrium

A market state where supply equals demand, and no economic agents have the incentive to change their behavior.

Utility Function

A mathematical representation of how a consumer ranks different bundles of goods according to the level of satisfaction or happiness they provide.

Endowed

Provided with a quality, ability, or asset; often used in the context of endowed chairs in academia or endowed grants/funds.