A Monopoly Firm Operates with Declining Marginal Cost

question 88

Multiple Choice

A monopoly firm operates with declining marginal cost.If regulators impose marginal cost pricing, the market will

• A)remain a monopoly but behave like a perfectly competitive industry.
• B)become perfectly competitive.
• C)be entered by additional firms but will not necessarily become perfectly competitive.
• D)be exited by the existing firm if the regulators will let the firm leave the market.

---

Definitions:

Put Option

A financial derivative that gives the holder the right but not the obligation to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Foreign Currency

Monetary units issued by countries other than the home country of a business or investor, involved in international transactions.

Right to Sell

The legal permission or authority given to a person or entity to sell a product or service.

Currency Swap

A financial derivative product that allows two parties to exchange principal and interest in different currencies, used to hedge currency risk or obtain financing in foreign currency.