Consider a Natural Monopoly That Has Declining ATC Over the Entire

question 20

Multiple Choice

Consider a natural monopoly that has declining ATC over the entire range of the market demand curve. If it is regulated and required to charge a price that is equal to MC, the resulting level of output is

• A) less than the allocatively efficient level, but losses occur.
• B) greater than the allocatively efficient level, but losses occur.
• C) allocatively efficient, but the firm must be paid a subsidy or it will eventually go out of business.
• D) less than the allocatively efficient level, and profit is zero.
• E) allocatively efficient, and profit is earned.

---

Definitions:

Competence

Refers to having the necessary ability, knowledge, or skill to do something successfully or efficiently.

Indirect Institutional Discrimination

Practices or policies in institutions that may not explicitly discriminate, but result in unequal treatment of certain groups.

Hijab

A head covering worn in public by some Muslim women as a symbol of modesty and privacy.

Quebec Civil Service

pertains to the body of public sector employees working for the provincial government of Quebec, Canada, involved in the administration of public policy and services.