Under an Average-Cost Pricing Policy

question 3

Multiple Choice

Under an average-cost pricing policy

• A) a regulatory agency picks a price equal to a natural monopoly's marginal cost.
• B) a regulatory agency picks a price equal to a natural monopoly's average fixed cost.
• C) a regulatory agency picks a price at which a natural monopoly's demand curve intersects its average cost curve.
• D) firms earn economic profits greater than zero.

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Definitions:

Underground Materials

Substances found beneath the earth's surface which can include minerals, oil, gas, or groundwater.

Property

Assets or possessions owned by an individual or entity, including tangible items like real estate and personal items, or intangible rights.

Easement

An irrevocable right to use some part of another’s land for a specific purpose, without taking anything from it.

License

A license is a legal permission granted by a competent authority to engage in an activity or to use a certain type of property that would otherwise be forbidden.