One Problem with Regulating a Monopolist on the Basis of Cost

question 88

Multiple Choice

One problem with regulating a monopolist on the basis of cost is that

• A)by focusing on costs, the regulators ignore profits.
• B)it does not provide an incentive for the monopolist to reduce its cost.
• C)a monopolist's costs, by definition, are higher than costs of perfectly competitive firms.
• D)a monopolist is still able to generate excessive economic profits.

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Definitions:

Market Rate of Interest

The prevailing rate at which interest is paid by borrowers for accessing funds in the financial market.

Selling For

The process or act of offering goods or assets for sale at a particular price.

Normal Yield Curve

When the yield curve slopes upward, it is said to be “normal,” because it is like this most of the time.

Downward Sloping

Describes a trend or graph line that decreases in value as it moves from left to right, often used in finance to describe declining interest rates or stock prices.