Which of the Following Is a Problem That Arises When

question 188

Multiple Choice

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC) ?

• A) This price will force the firms out of business in the long run.
• B) The firms have an incentive to pad their fixed costs.
• C) When price is equal to MC, new firms will enter the industry and drive up the costs of production.
• D) Both b and c are correct.

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Definitions:

Industry-Wide Bargaining

The process of collective negotiations conducted between labor unions and employers across an entire industry, rather than with a single employer.

Collective Bargaining

The process of negotiation between employers and a group of employees aimed at reaching agreements to regulate working conditions.

Codetermination

A practice where workers have a role in the management of companies, often through representation on corporate boards.

Social Partnership

A form of governance in which employers, unions, and sometimes government agencies collaborate to make major economic and labor decisions.