Policymakers Are Discussing Various Proposals Regarding How to Deal with Natural

question 575

Multiple Choice

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

• A)Senator Huff
• B)Senator Puff
• C)both senators
• D)neither senator

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Definitions:

Good Y

Typically refers to a variable representing a particular good or service in economic models.

Units

A standard measurement or quantity used to specify or measure, such as pieces, liters, or kilograms.

Utility Function

A mathematical representation of how different combinations of goods or services contribute to a consumer's satisfaction.

Budget Constraint

A limitation that represents the combination of goods and services that a consumer can purchase given their income and the prices of those goods and services.