Regulators Usually Encourage Natural Monopolists to Engage in

question 145

Multiple Choice

Regulators usually encourage natural monopolists to engage in

• A) marginal cost pricing.
• B) average cost pricing.
• C) marginal cost pricing, with subsidies from the government offsetting the losses.
• D) inefficient pricing.

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Definitions:

Optimal Output

The level of production that maximizes a firm’s profit or minimizes its cost under given conditions.

Profit

The financial gain acquired when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Industry Supply Curve

A graph that shows the relationship between the price of a good and the total output of the industry for that good.

Price Levels

The mean value of present prices for all goods and services created within the economy.