If the Government Regulates the Price That a Natural Monopolist

question 618

Multiple Choice

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

• A)earn zero profits.
• B)earn positive profits, causing other firms to enter the industry.
• C)earn negative profits, causing the firm to exit the industry.
• D)minimize costs in order to lower the price that it charges.

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Definitions:

Unstated Premise

An implicit assumption in an argument that is not directly expressed but is required for the conclusion to follow.

Leprechauns

Mythical creatures in Irish folklore, often depicted as small, bearded men who partake in mischief.

Enthymeme

An argumentative technique that operates as a syllogism but omits one of its premises.

Validity

The degree to which a method, conclusion, or measurement is well-founded and likely corresponds accurately to the real world.