When Regulators Use a Marginal-Cost Pricing Strategy to Regulate a Natural

question 81

Multiple Choice

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

• A)will experience positive profit.
• B)will experience a price above average total cost.
• C)does not need a government subsidy to remain in business.
• D)will experience a loss.

---

Definitions:

Collateral

An asset that a borrower offers to a lender as security for a loan, which can be seized if the borrower fails to repay the loan.

Callable Bond

A type of bond that gives the issuer the right to pay off the bond before its maturity date.

Debenture

A type of debt instrument that is not secured by physical assets or collateral.

Interest Rate

The fee a lender imposes on a borrower for the utilization of assets, represented as a proportion of the principal amount.