If the Government Sets a Natural Monopolist's Price Equal to Marginal

question 35

Multiple Choice

If the government sets a natural monopolist's price equal to marginal cost, the:

• A) natural monopolist will decrease output.
• B) natural monopolist will earn even larger profits.
• C) higher price will create forgone gains from trade.
• D) natural monopolist will incur a loss and be forced to shut down unless there is a subsidy.

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Definitions:

Voltaire

A French Enlightenment writer, historian, and philosopher famous for his wit, criticism of Christianity, and advocacy of freedom of speech and religion.

Church

A building used for public Christian worship or the organizational structure of religious Christian communities.

Physiocrats

A group of 18th-century economists who believed that the wealth of nations was derived solely from the value of land agriculture or land-based products.

Wealth

A measure of the value of all the assets of worth owned by a person, community, company, or country.